Fortescue confirms reports of further financing opportunities for expansion
Iron ore mining firm Fortescue Metals Group Ltd (ASX: FMG) confirmed on Wednesday that it has been conducting negotiations with several financial groups following reports published by the Australian Financial Review that the company is mulling a capital raising of up to $US6 billion or $A6.11 billion.
The reports came in the heels of a fresh refinancing facility of $US2.04 billion or $A2.08 billion recently secured by the company to finance its planned expansion, which Fortescue said "has delivered the company freedom to pursue its advanced expansion plans."
The Australian Financial Review report claimed that in spite of the planned return of the emerging iron ore giant to the capital market for additional funds, it is poised to retain its credit rating of BB+.
Fortescue admitted that it is indeed conducting talks with a number of entities that could contribute to the financial opportunities of the company, adding that the company "continues to receive advice from its advisors and will inform the market if and when any formal decisions are made."
Over the weekend, Fortescue revealed that it has achieved substantial relief on its balance sheet worries through the refinancing of the company's existing senior secured notes with a new corporate bank facility given by JP Morgans and Royal Bank of Scotland.
A research note issued by UBS on Monday said that Fortescue would buy back all senior secured notes for $US650 million or $A661.54 million with interest rate of 7.5 percent, discounted from the original facility interest rate of 10 percent, enabling the company to save up to $US250 million or $A254.44 million in nominal terms though a little lower in present value of $US185 million or $A188.29 million.
The same UBS statement expressed confidence that the refinancing facility would be a boost on Fortescue's aim of ramping up its current production rate to 55 million tonnes per annum (MTPA) with the use of the company's in placed port and rail facilities in the Pilbara region of Western Australia.
The company achieved 41.25 MTPA by the closing of fiscal 2010 and expects to reach its new goal by June 2011 after the completion of its new processing plant in Christmas Creek, with further objective of breaching the 55 MTPA mark through the use of two ports and three hubs mining approach.
As of 1302 AEDT on Wednesday, Fortescue Metals shares were trading up by 39 cents or 6.5 percent to $6.39.