Fortescue Metals is taking advantage of firmer iron ore prices to further trim its massive debt pile.
The world’s fourth biggest iron ore exporter will buy back corporate bonds worth $US577 million ($A745 million) on June 1, a move it says will also deliver interest savings of $US48 million a year.
“This debt repayment delivers on our sustained commitment to reduce all-in costs, further generating strong cash flows and continuing to reduce our debt,” chief executive Nev Power said.
Fortescue has raced to cut costs this financial year as it grapples with the prolonged mining downturn, and has also focused on trimming its debt, which stood at $US5.9 billion at the end of March.
Earlier in April, the miner said it had stripped cash costs by 43 per cent from a year ago to $US14.79 per wet metric tonne of iron ore.
A rebound in iron ore prices in recent months has also given Fortescue some breathing space.
Spot prices touched a decade-low of $US38 a tonne late in 2015, but have recovered to nearly $US63 a tonne on Wednesday, though that is still down two-thirds from their peak in 2011.
The slump in prices forced Moody’s to cut Fortescue’s credit rating to two notches below investment grade earlier this year.
With the latest bond buyback, the company has now repurchased debt worth $US1.7 billion in the last 12 months. It last bought back corporate bonds worth $US750 million during the December quarter.
Fortescue shares initially surged on the news, but lost ground in afternoon trade, along with the wider market, to drop nine cents, or 2.9 per cent, to $3.06. They have gained nearly 70 per cent so far in 2016.