Shares of Australia's third largest iron ore player Fortescue Metals Group Limited (ASX: FMG) are trading 0.6% higher today after the miner released a rather impressive set of production numbers on Friday last week.
Fortescue announced that it had shipped 14.4 million tonnes (mt) of iron ore in October 2014, equating to an annualised rate of 172mt. That compares to the company's promise of between 155 million and 160 million tonnes for the 2015 financial year. However, the miner has not yet increased its annual guidance – possibly as a result of the upcoming cyclone season which can heavily impact iron ore production in the Pilbara.
The higher rate of production will certainly help to offset some of the effects of the plunging iron ore price. Currently trading at US$75.50 a tonne, the commodity has fallen by 44% since the beginning of the year, applying enormous pressure to the nation's higher cost miners. While Fortescue maintains lower breakeven prices than most of its competitors, it's still a risky prospect for investors given its enormous debt load.
A safer alternative to Fortescue would be an investment in BHP Billiton Limited (ASX: BHP), thanks to its higher level of diversification and even lower cost base. However, with forecasts suggesting iron ore could plunge to just US$70 a tonne this year, even BHP might be a risky move in the near term.
