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Iron ore shipments for 2017 met guidance at 330.1 million tonnes (Rio Tinto share: 272 million tonnes), an increase of 1 per cent on 2016, reflecting ongoing productivity improvements being made to the rail network, along with increased flexibility across the infrastructure system. Production of 329.8 million tonnes (Rio Tinto share: 271.3 million tonnes) in 2017 was in line with 2016 output.
In 2017, the Iron Ore product group's underlying earnings increased by US$2,081 million, up 45 per cent on 2016. This was achieved through record sales volumes, continued cash cost savings and higher iron ore prices.
Approximately 67 per cent of sales in 2017 were priced with reference to the current month average, 17 per cent with reference to the prior quarter's average index lagged by one month, five per cent with reference to the current quarter average and 11 per cent were sold on fixed terms on the spot market. Approximately 67 per cent of 2017 sales were made on a cost and freight (CFR) basis, with the remainder sold free on board (FOB).
We own six pastoral stations in the Pilbara - Karratha, Hamersley, Rocklea, Juna, Yalleen and Yarraloola covering an area of approximately 1.1 million hectares. We operate and manage Hamersley, Rocklea and Juna Downs with the other three stations being subleased to third party operators.
Our first agriculture project commenced in 2012 and comprises 16 centre pivot irrigators. Known as the Hamersley Agricultural Project, it represents an innovative use for excess water from the dewatering of the nearby Marandoo mine as it is developed below the water table. The agriculture project is situated on Hamersley Station adjacent to Karijini National Park and will operate for the life of the mine. Following the successful establishment of the Hamersley Agricultural Project, we commissioned the Nammuldi Agricultural Project in June 2014. This project utilises mine water from the below water table component of the nearby Nammuldi and Silvergrass mines and consists of 19 pivots.
With a combined area of 1650 hectares the two irrigation operations produce grow crops that are turned into hay and purchased by cattle stations across the Pilbara. Crops grown across the two irrigation areas include the perennial Lucerne and Rhodes Grass along with annual oat crops.