UPDATE: Fortescue Quarterly Ore Shipments Hit By Cyclones

Fortescue Metals Group Ltd. (FMG.AU), one of the world's largest iron ore producers, said Thursday that it is holding to its full-year production target and expects to make up shipments of the steelmaking commodity lost when cyclones hit Australia's western coast.

Ore shipments, while up 50% on a year earlier as the company continues to ramp up mining capacity, fell 15% quarter-on-quarter to 12.6 million metric tons in the three months through March, including some ore exported for another company, data from the Perth-based company showed.

Two cylones swept across the remote Pilbara region in the quarter, temporarily shutting Port Hedland and other ports along the coast. Fortescue said the bad weather delayed shiploading for a total of eight days, and with a scheduled four-day maintenance shutdown at the end of January meant shipments for its financial third quarter dropped to 69 from 82 in the prior three months.

The Pilbara's high-quality iron ore is in demand in China and elsewhere and accounts for nearly two-thirds of global exports by sea. Rio Tinto PLC's (RIO) production of iron ore, which is predominantly in the Pilbara, fell 11% on quarter to 45.6 million tons, while BHP Billiton Ltd.'s (BHP) iron ore output fell 8% to 37.9 million tons.

Fortescue said it expects to deliver 15.8 million tons this quarter and is maintaining guidance for production to reach 55 million tons this financial-year.

"It is expected that Fortescue will catch up on the delayed shipments through this current quarter," it said in a statement.

Credit Suisse said in a research report that the quarter was weak, although not particularly important for the year, so it will likely retain its forecasts and an outperform recommendation for the shares.

The cyclones and flooding pushed Fortescue's production costs to US$52.56 a ton for the quarter from US$46.43/ton in the previous quarter, and the company said it realized an average price for its ore of US$126/ton.

Fortescue last month raised US$2 billion in junk bonds to help pay for roughly tripling its production capacity, to 155 million tons a year, in 2013. The company was only formed in 2003 and has expanded rapidly, taking advantage of growing demand for the commodity in China.

It said the expansion remains on track and on budget.

-By Robb M. Stewart, Dow Jones Newswires; +61 3 9292 2094; robb.stewart@dowjones.com