If the company achieves the lower end of the ambitious target, it could become the world’s lowest cost producer on a C1 cost basis.

C1 costs for the June quarter were $14.31/t and $15.43/t for the financial year.

The company recorded C1 costs of $13.10/t for the month of June, in line with its goal of exiting FY15 at $13/t.

Iron ore shipments were 43.4 million tonnes for the quarter, and 169.4Mt for the year.

FY17 guidance is for shipments of 165-170Mt at C1 costs of $12-13/t.

Net debt at the end of June was $5.2 billion after $2.9 billion of repayments through the year, lowering net gearing to below 40%.

Cash on hand was $1.6 billion.

FMG CEO Nev Power said the June quarter had been another outstanding operational period for the company.

“Costs have been lowered for the tenth consecutive quarter and our continued focus on productivity and efficiency measures will drive C1 costs even lower in FY17,” he said.

“With net debt reduced to $5.2 billion, we are fast approaching our initial balance sheet targets and will continue to apply cash flows to further reduce debt.

“Our team continued to innovate and deliver sustainable cost improvements through a focus on productivity and efficiency at our world class mining and infrastructure assets to generate long-term value for our shareholders.”

The company spent $31 million on exploration in FY16 and has budgeted $40 million for FY17, focused on the Pilbara.

It is also planning for a replacement to firetail in the next five years, with capital costs for the development of satellite orebodies estimated to be in the order of $1-1.5 billion.

FMG shares jumped 6.4% to $A4.385, close to the two-year high of $4.43 reached earlier this month.