Fortescue has entered into arrangements for the construction of four efficient very large ore carriers (VLOCs) for a total investment value of US$275 million, the company announced in a June quarterly report.
Construction is expected to commence in the second half of 2014, with delivery scheduled for November 2016 through to May 2017, with the majority of payments due on delivery.
In addition, advanced negotiations are underway to secure four additional VLOCs with another major Chinese shipbuilder. These ships are expected to be delivered in late 2017 and early 2018, respectively, with the majority of payments also due on delivery.
"Fortescue's shipping strategy is to lock in construction of these VLOCs which are being designed to complement the port infrastructure to improve load rates, efficiencies and reduce operating costs," the report stated.
"Flexibility has been built into the ownership structure of these VLOCs which will allow Fortescue to explore alternative financing structures at a later date. The investment will initially be funded by existing operating cash flows and due to the timing of cash payments, is not expected to impact Fortescue's debt repayment strategy."
The company expects the operating cost of these vessels to be well below the current forward market rates for large capesize vessels. This, together with expected throughput benefits and operational savings at the port, support the initial investment.
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