November 28, 2014 / 7:15 AM / 4 years ago

UPDATE 1-Australia's Fortescue slashes spending as iron ore rout bites

* Fortescue still expects to ship 155-160 mln tonnes in FY15

* Says all mines are profitable (Adds Fortescue comments)

SYDNEY, Nov 28 (Reuters) - Australia’s Fortescue Metals Group, the world’s No.4 iron ore miner, said on Friday it was halving its capital spending for the 2015 financial year to $650 million but kept its production guidance intact.

Iron ore miners have been grappling with a 50 percent dive in prices to their lowest in 5-1/2 years as the top producers have flooded the market with new supply while economic growth and construction projects in top consumer China have slowed.

Fortescue, one-third owned by its billionaire founder Andrew Forrest, said it would cut spending by deferring some projects, reducing exploration and through other efficiencies.

It said it still expects to ship 155 million to 160 million tonnes of iron ore in the year to June 2015, maximising production through its existing mines.

“All of our mines are profitable,” Fortescue said in an emailed statement, in which it dismissed a rumour that it was closing Cloudbreak, one of its four mines, to help weather the downturn.

Fortescue said it was investigating “alternative ownership and funding opportunities” for four new iron ore carriers, which it is due to pay for starting in 2016.

“In the current environment it is prudent to defer investing additional capital that increases supply into the market,” Chief Executive Nev Power said in a statement.

Benchmark 62 percent grade iron ore .IO62-CNI=SI fell below $70 a tonne this month, from above $130 at the start of the year. Fortescue’s iron ore sells at a discount to the benchmark due to its lower grade.

Analysts in September estimated Fortescue would be making losses at prices below $70 a tonne, when the Australian dollar was trading around 93 U.S. cents. The Australian dollar has since weakened to 85 U.S. cents, keeping the company above water.

The company ran into trouble two years ago when it was at the peak of a massive expansion but has since cut costs as its output has reached 155 million tonnes a year. It also took advantage of higher prices to cut debt over the past year by $3.6 billion to $8.8 billion.

Fortescue’s shares have tumbled about 50 percent this year, in line with iron ore prices. The stock closed at A$2.94 on Friday, valuing the company at A$9.2 billion ($7.8 billion).

1 US dollar = 1.1755 Australian dollar Reporting by Lincoln Feast and Sonali Paul; Editing by Himani Sarkar and Richard Pullin

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