FMG suspends construction of rail line

Shares in NRW plummeted 36% or 16c this morning to 28.5c on the news.The Perth-based company said FMG has instructed NRW contractors to demobilise from site.The contract, worth around $87 million, was awarded to NRW in July and involved 44 kilometres of rail earthworks, with associated drainage, road deviation and road underpass works between the two mine sites.The initial targeted date of completion for the work was December 31 and NRW said today around 47% of the contracted work had been completed.The company said it was continuing operations for FMG at the Christmas Creek minesite and, at this stage, NRW said it expects to resume work on the rail line in April 2009.“I would reiterate that the contract has not been terminated, merely suspended because of wider operational requirements by the client,” NRW chairman Ian Burston told shareholders at the company’s annual general meeting in Perth this morning.NRW said despite the contract suspension, the company saw no reason to alter its profit guidance.The company posted a pro forma net profit after tax $41.4 million for the 2007-08 financial year, and expects that figure to grow 15-20% over the current fiscal year.FMG has previously announced it would be slowing its Pilbara expansion plans as Chinese demand for iron ore wanes. Around 200 WorleyParsons contractors have already been withdrawn from work on the expansion, as FMG defers costs into next year.FMG executive director Graeme Rowley said yesterday the company is still aiming to reach its 80 million tonne per annum production rate by the first half of 2010.

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