One iron ore stock to sell – Fortescue Metals Group Limited

Successfully completed fund raising: Fortescue Metals Group Limited (ASX: FMG) has recently finished an offering of senior unsecured notes. The offering was initially launched at US$1,000 million; and based on investors’ demand, the offering was upsized to US$1,500 million. For March 2017 quarter, FMG reported shipments of 39.6mt of iron ore with 12% improvement in cash production costs (C1) of US$13.06 per wet metric tonne (wmt) over the prior corresponding period. However, the heavy fall in iron ore prices in the last few months might have impacted the group’s margins to some extent. 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 ton with a C1 cost of US$13.06/wmt generated strong cash flows which were applied to a further US$1.0 billion debt repayment in March.


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