Fortescue Metals Group secured a staggering 47 per cent price hike for its iron ore in the recent quarter as market forces and company strategy combined to deliver big windfalls for the company.

While iron ore shipments were off 10 per cent in the March quarter to 38.3 million tonnes because of disruptions attributable to Cyclone Veronica, the US$71 ($98.94)/t the company received for its ore will more than compensate financially for the lost production.

Even a 4 per cent lift in C1 costs to US$13.51 ($18.83)/t will be immaterial to the Andrew Forrest controlled miner.

The miner benefited from a 16 per cent surge in the benchmark 62 per cent iron ore price in the quarter, bolstered by supply cuts out of Brazil’s Vale because of a deadly tailings dam disaster in the country.

But it also gained from moderating discounts from its mainly lower grade fines product, attributable to skinnier margins for Chinese steel mills.

Fortescue’s average ore price would also have benefited from the shipment of 3.8Mt of its new West Pilbara Fines product, which is graded at 60.1 per cent, higher than its average 58 per cent product.

Chief Executive Elizabeth Gaines said long-term contracts for offtake of the company’s West Pilbara Fines product had now been finalised with nine customers, accounting for the majority of output.

“We recently announced the approval of the 22Mtpa, US$2.6 billion Iron Bridge Magnetite Project.

“Building on the success of the launch of West Pilbara Fines, the Iron Bridge product will increase our average grade, providing Fortescue with the ability to deliver the majority of our products at greater than 60 per cent iron grade.

Fortescue reported a fairly modest 2.5Mt in lost shipments owing to the five-day cyclone related closure of Port Hedland port.

“We are now expecting full year shipments of 165-170Mt and C1 costs in the range of $US13-13.50 per wet metric tonne.”

This morning’s result has justified the strong rally in the iron ore miner’s shares from the beginning of this year, which had been up as much as 90 per cent earlier this month from its December-end price of around $4.

Image: Elizabeth Gaines, The West Australian.