CHART: This is how Fortescue is cutting the cost of digging up a tonne of iron ore

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Fortescue Metals has been slashing costs as fast as it can to try to catch the falling price of iron ore.

In its quarterly market update, Fortescue says its costs for June were $US19 per tonne, ahead of guidance and a good start for a target of $US18 in the 2016 financial year.

This chart shows the savings per tonne by each initiative. OPF stands for Ore Processing Facilities. Improvements in this area means Fortescue has been consistently able to deliver an average 58% iron content.

Fortescue has taken out $US1.6 billion in overheads and plans a further $US1.4 billion in 2016.

The cost of a tonne, delivered to a customer, including shipping, royalty and administration expenses, is now $US31, 9% lower than in the March quarter. And in June, this was down to $US28.

Currently the iron ore price is hovering around $US50 a tonne and Fortescue estimates a break even price of $US39 a tonne.

With smaller margins, Fortescue, and other miners, have been increasing production to make up for the shortfall.

Fortescue increased its own iron ore shipments by 33% to 165.4 million tonnes in the 2015 financial year.

In percentage terms, this is bigger than BHP, which increased output by 13% to a record 254 million tonnes in the 2015 financial year.

Fortescue shares are down more than 5% today to $1.66.

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