Fortescue Metals Group (FMG) shares went for a little run in yesterday’s market surge on the oddest of stories that the iron ore miner has been approached to sell stakes in its operations.
The story appeared after an interview with the CEO Nev Power appeared in the Wall Street Journal and Dow Jones – in it Power said there had been approaches, and ruled out any sale.
The shares jumped 9.5% to $2.19, then retreated when punters took a closer look at what was actually said. They closed up 4.6% at $2.05.
The Wall Street Journal reported that Power had said in the interview Fortescue had been approached to sell stakes in its Pilbara mining operations.
But no advanced negotiations are under way and Fortescue would prefer to wait for the price of iron ore to rebound, according to Power’s comments.
“We are in very strong shape and therefore we can be patient,” he was quoted as saying. "That might mean we need to wait until potential investors think the iron-ore price is about to go up again, and then they will be more motivated."
Mr Power also said in the interview that Fortescue expects to be able to pay down its multi-billion-dollar debts through the cash it makes from running its mines, and would only sell a stake or stakes in its mines to accelerate that process.
The company struggled tor raise funds to restructure its debts and was forced to pay above the odds eventually – 9.75% for $US2.3 billion with a seven year maturity.
But because of the restructure Fortescue doesn’t have any repayments due until 2019, giving it a lot of room to generate the cash to make a decent dent in the debt load of around $US7.8 billion.
It was only a month ago that Fortescue said it was “open to commercial discussions with a range of groups on a regular basis at the mining asset level”. Several media reports named some Chinese steel companies, but nothing more has been heard.
World iron ore prices are up around 30% to $US57.42 a tonne since hitting a multi-year low in early July of just over $US44 a tonne.
Two weeks ago Fortescue reported an 88% fall in net profit for the 12 months to June 30 to $US316 million.
