FMG continues debt repayment

Fortescue Metals has used the September quarter wisely, paying back $US384 million in debt.

The company finished the period with $US2.6 billion in cash reserve, of which CEO Nev Power said $1.5 billion was available to pay down debt.

Earlier this year Fortescue announced it would refinance debt with a $US2.3 billion senior secured notes offering and extend existing bank facilities, pushing debt beyond 2021.

The company has targeted a gearing ratio of 40 per cent, and intends to achieve that within 18 months, iron ore market permitting.

The annual cash production cost guidance has been cited at $US18 per tonne, with 165 million tonnes to be shipped in the coming year, however Power has said he expects to be able to drop cash costs to $US15 per tonne by next financial year.

Despite Fortescue’s rally of the past month, share prices dropped nine per cent on Tuesday, a 22c loss from $2.56 to $2.34, and have continued to drop this morning to $2.25 at 10:30am.

Iron ore has confomed to the dead cat bounce pattern, resuming it's decline from a three month high around $US58 to the current level of $US51.

Pundits say the commodity is headed for further losses, with Citigroup calling a drop below $US40 per tonne in the first half 2016.

To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.