- Producer says cashflow generation means funds available
- Iron ore supplier sees cash costs falling further in 2016
Fortescue Metals Group Ltd., Australia’s third-largest iron ore supplier, said it’s got an extra $1.5 billion available for further debt repayment as cost cutting has boosted cashflow.
The amount is in addition to the $384 million of on-market debt repurchases the Perth-based producer made in the September quarter, Chief Executive Officer Nev Power said Tuesday in an e-mailed statement. Fortescue, which had net debt of $6.6 billion at the end of September, flagged this month that it will seek to continue to cut its liabilities even as it upholds dividend payments.
“A focus on efficiency and optimization combined with a relatively new asset base mean both our operational costs and capital expenditure are sustainably low with further improvement to come,” Power said in the statement, ahead of an investor tour of its assets in Western Australia. “At the same time, Fortescue is committed to progressively and systematically reducing our debt over the medium term to an initial gearing target of 40 percent.”
Fortescue fell 9 percent, the most in two months, in Sydney trading Tuesday to A$2.33, extending its decline this year to 15 percent. The statement was issued after the market closed.
Fortescue, which has halted output expansions on weaker prices, forecasts it will cut its cash production costs below $15 a wet metric ton in three months to June 30, Power said in the statement. The producer cut first-quarter production costs by 24 percent, it said this month.
While benchmark iron ore prices have held between $50 and $60 since July 10, supported by low port stockpiles in China, Westpac Banking Corp. forecasts the range will probably give way before year-end and Goldman Sachs Group Inc. has predicted further losses.
Ore with 62 percent content delivered to Qingdao lost 1.1 percent to $51.03 a dry ton on Monday, the lowest since July 16, according to Metal Bulletin Ltd.