Fortescue Metals Group Ltd Widening of spreads in prices impacting the business

Widening of spreads in prices impacting the business:Fortescue Metals Group Ltd (ASX: FMG) reported for 39.6 million tons of iron ore shipments during Q3FY17 at cash production costs (C1) of US$13.06 per wet metric tonne (wmt), which was a 12% improvement over the prior comparable period and 4% higher than the December 2016 figure due to wet weather impacts on production and shipments. During the quarter, Fortescue repaid a further US$1.0 billion of debt, reducing gross debt to US$4.3 billion, inclusive of US$0.7 billion of finance leases with US$1.5 billion cash on hand at 31 March 2017. This debt reduction has lowered gross gearing to 31% with net gearing of 22%. The average realized iron ore price of US$65 per dry metric tonne with a C1 cost of US$13.06/wmt generated strong cash flows. However, the group has lowered its FY17 price realisation guidance owing to widening of spreads in prices.

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