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Fortescue to cut debt after posting record profit

February 20, 2014 • Mining & Resources

Fortecsue Metals Group, the world’s fourth biggest iron ore producer, has more than tripled its half-year profit and is planning on reducing its large debt pile by the billions while iron ore prices remain high.

Iron ore piles Image credit: flickr User:  cam17

Iron ore piles
Image credit: flickr User: cam17

According to the article on The Australian, the debt-ridden mining giant made a $US1.71 billion ($A1.9 billion) profit in the six months to December 31, up from $US478 million in the same period a year earlier.

The iron ore price has remained high during the past 12 months, allowing Fortescue to speed up the process of repaying its debts.

Chief financial officer Stephen Pearce said the company is ramping up production to hit its cost and production targets and is looking to repay more than $2 billion of the $10 billion debt by the end of 2014.

“We would look to repay another couple of billion to get towards our target gearing levels,” Mr Pearce told reporters on Wednesday.

“The exact timing of that will depend on where the iron ore price sits.”

The Plibara miner plans to use some of its $US2.9 billion in cash to make a $US1.6 billion repayment by March 14th, taking total repayments to $US3.1 billion since November last year.

Chief executive Nev Power predicts the price will average between $US110 to $US120 per tonne for the remainder of 2014, but with some short term volatility.

“There is quite a bit of new supply coming into the market, but most of that now has really already come in and we’re seeing that supply absorbed by strong steel and imported iron ore demand,” he said.

According to him, the record profit result underlined the success of Fortescue’s strategy to construct new capacity, ramp up production and reduce costs.

Half year revenue went up 77% to $US5.8 billion, with shipments up by 51%. The company also confirmed it remains on track to deliver iron ore at a rate of 155 million tonnes per annum by the end of March 2014.

Fortescue shares dropped by 14 cents, or 2.3%, to $5.84.

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