Fortescue Metals Group Limited (ASX: FMG) has been recognised as the world's lowest cost seaborne supplier of iron ore, based on Metalytics Resource Sector Economics November 2016 review.
It's an astonishing achievement considering the company only shipped its first ore in 2008, and has managed to reduce its costs from US$48 per wet metric tonne (wmt) in the 2012 fiscal year to US$15.43/wmt in the last financial year.
In the most recent quarter, Fortescue achieve C1 cash costs of US$13.55 a tonne and is aiming for even lower C1 cash costs in the 2017 financial year. That will no doubt be helped when the company's very large ore carriers (VLOCs) begin service.
As a result of slashing costs, Fortescue managed to achieve a 212% increase in net profit in the 2016 financial year, despite revenue falling 17%.
The increased cash flow has also allowed the miner to rapidly pay down its debt levels, with net debt now US$5.2 billion, compared to US$7.2 billion at the end of June 2015.
Rio Tinto Limited (ASX: RIO) and BHP Billiton Limited (ASX: BHP) aren't far behind Fortescue as the chart below shows, although some analysts will dispute that Fortescue is a lower cost producer than Rio Tinto.
What the chart does show is that the three Australian miners and Brazil's Vale are clearly well ahead of the higher cost Chinese iron ore producers.
Fortescue's progress in cutting costs and generating cash flow which has allowed the miner to repay billions of dollars of debt have also seen the company's share price soar more than 270% in the past year alone to the current price of $6.70.
