Fortescue Metals (FMG) has green-lit the Eliwana Project in Western Australia following Board approval this week. The project will include an additional 143km rail spur, a new 30Mtpa dry ore processing facility and associated infrastructure. Estimated capital costs for the project are US$1.275bn with production due to commence in December 2020. FMG will deploy capital in stages with the bulk of spending expected in FY20. Management had previously suggested construction could begin as early as July-August 2018. The news is positive and helps FMG sustain a long term run rate of 170Mtpa, however questions still remain for Eliwana Reserves (due August 2018), operating costs as well as the planned product integration. Maintain HOLD.
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