Fortescue Metals Group (ASX: FMG) reactivated its plan to boost its production target of iron ore to 155 million tonnes a year due to improved prices of the commodity in global markets.
An iron ore stacker is seen at the Fortescue Metals Group Cloudstack mine in West Australia's Pilbara region. Fortescue announced that two of its three expansion projects have been placed on hold due to the financial impact of the government's proposed Resource Super Profits Tax (RSPT).
To achieve that, the miner announced on Thursday that it will resume work on its Kings deposit in the Pilbara region. The Kings' deposit produces about 40 million tonnes of iron ore per year.
However, Fortescue Chief Executive New Power said the miner will not reinstate 1,000 workers and contractors it fired in September to help the firm cope with future price volatility. Instead of bringing back the old workers, Fortescue will redeploy contractors from the nearby Firetail project.
Besides sacking workers, Fortescue also sold its assets to cut its debt load and stabilise its balance sheet.
"As we built up for the expansion and the ramp-up, the focus was on getting things done quickly, and we built our numbers too quickly for that. We ended up with more people than we needed," The Australian quoted Mr Power.
Iron ore prices climbed this week to $135 per tonne from $86.70 on Sept 5. The increase was due to stronger Chinese growth and falling inventories of the commodity in China.
Chinese iron ore inventories plummeted to a two-year low due to higher demand for the commodity, which stockpiles at major ports in China went down 3.3 per cent to 71.32 million metric tonnes as of Dec 21.
Analysts, however, said the improved commodity prices will take until the June quarter to begin generating tax revenue gains for Treasury. Credit Suisse analysts forecast iron ore prices would be between $130 and $140 a tonne for January and February 2013.
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