FMG’s cost cutting sent us broke: contractor

A contractor working for Fortescue Metals Group has blamed the miner's cost cutting measures in late 2012 for its collapse into liquidation.

The West Australian reports Queensland-based Fuel-Sys Installations claims it's owed around $10 million by FMG.

Anonymous company sources say FMG's decision to cut costs and defer payments was a key reason for its collapse.

Fuel-Sys, which installs and repairs fuel lines and tanks, was working on FMG's Solomon mine expansion when the debt-laden miner slashed costs last year.

FMG was one of many miners to cut costs and delay payments as iron ore prices fell below $US90 a tonne, but while its expansions are back on track some smaller services companies are still feeling the pinch.

According to The West Australian Fuel-Sys has started legal action against FMG to recover unpaid funds.

But FMG has denied the allegations and claims the contractor was unable to complete work “within the parameters of the contract”.

“Fortescue rejects any claim for payment beyond those amounts Fuel-Sys was entitled to be paid under the contract, which amounts Fortescue has already paid,” the company said.

Lawyers acting on behalf of Fuel-Sys said a final decision on legal action had not been made and it was “early days” in the proceedings.

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