Fortescue Metals Group (FMG) has paid down another tranche of debt and reduced its net debt position by $US600 million, after a strong quarter of cash generation and slightly lower sales.
The news in the September quarter report saw the shares up 6% to $2.29.
The 41.9 million tonnes of iron ore shipped by Fortescue during the three months to September 30 was lower than the 42.4 million tonnes shipped in the June quarter, but were still enough to ensure the company is producing faster than it needs to reach its full-year export guidance of 165 million tonnes.
Fortescue maintained that export guidance yesterday.
Fortescue’s net debt position fell to $US6.6 billion from $US7.2 billion on June 30, and that fall was helped by an early debt payment of $US384 million. Gross debt was $8.8 billion and the company’s net cash position was $US2.6 billion at the end of September.
The debt payments were made on the company’s 2019 debt, as well as the debt due to mature in March 2022 and April 2022. (The company bought back some of its debt at 80 cents in the dollar.) The company saved around $33 million in annual interest costs.
FMG 1Y – Fortescue hacks into debt pile
Exports were well down on the 45.1 million tonnes in the quarter, meaning the company entered the present quarter with high available stock levels.
Cash costs (production costs) were cut to $US16.90 ($A23.15) a tonne in the three months ended September 30 from the June quarter’s $US22.16. It has been helped by the weakening Australian dollar which was trading at 73 US cents yesterday.
The company yesterday lowered its cash costs target to $US15 a tonne for the year, at an Australian dollar of US72c. Just two months ago, Fortescue had forecast cash costs of $US18 a tonne for fiscal 2016, at an Australian dollar of 77 cents. The dollar is now trading at US73c.
