Andrew Forrest’s Fortescue Metals Group is in no rush to offload assets as it steams ahead with cost cutting and debt relief to shore up its future.
The Pilbara iron ore miner’s debt stands at $US6.6 billion, amid softening steel demand in China, but it has given itself some breathing space by reducing costs by 24 per cent and repurchasing $US384 million of debt in the September quarter.
Chief executive Nev Power said Fortescue plans to continue cutting costs and reducing debt as the iron ore price hovers around $US55 a tonne.
“We’ve put ourselves in a position where we don’t need to do any asset sales,” Mr Power said.
“We’ve been paying down debt and accumulating cash and that allows us to assess any potential asset sales on the basis of long-term value and terms.”
In recent months, Fortescue has repeatedly dismissed reports it has been close to selling some of its infrastructure to foreign investors.
Fat Prophets resources analyst David Lennox said dramatic cost cutting and no debt repayments due until 2019 put the company in a healthier financial position.
“The saviour is the costs,” Mr Lennox said.
“You’d think now they’re pretty comfortable.”
Fortescue shares gained 13 cents, or six per cent, to $2.29.
Currency movements have also benefitted the company, which has a break-even price of around $US37 a tonne.
During the quarter, Fortescue sold its iron ore at an average realised price of $US50 per tonne.
Mr Power said demand for the company’s products remained strong in the September quarter, and the miner is confident of maintaining lower costs than Brazilian rival Vale.
He said no changes in demand are anticipated once Gina Rinehart’s $10 billion Roy Hill begins shipping iron ore in the coming weeks.
But he admits prices could still fall.
“I don’t think there’s any floor,” Mr Power said.
ANZ analysts predict the commodity will trade between $US45 to $US50 a tonne over the next two years.
Fortescue shipped almost 42 million tonnes of iron ore in the three months to September 30, and still expects to ship 165 million tonnes of iron ore in the financial year.