Shaky FMG cuts jobs, expansions, and assets

Fortescue Metals Group has deferred some expansions, sold assets, and cut hundreds of jobs in an effort to stay profitable.

In a statement yesterday FMG said it had cut $4.6 billion off forecast spending for FY2013.

The main savings will come from deferring completion of a fourth berth at Herb Elliott Port and delaying development of the Kings deposit.

Staff numbers and operating costs will also be reduced, with FMG focusing on cutting costs at the Cloudbreak mine.

FMG CEO Nev Power said the cutbacks would allow the company to stay flexible and it would resume delayed expansions when "iron ore prices return to more sustainable levels".

"We are confident that the underlying fundamentals of the Chinese economy are strong and we believe iron ore prices will rebound in the medium term," he said.

"However, we have moved quickly to strengthen the balance sheet."

In a separate statement today FMG also confirmed it had sold the power station at its Solomon mine in the Pilbara to a subsidiary of TransAlta for $US300 million.

Power said the sale was "consistent with the company's focus on core infrastructure" and represented a key step in its Pilbara expansions.

"It was always our intention to divest the Solomon power station to an established owner and operator of power generation assets," he said.

The cutbacks come as ratings agency Moody's continues to review FMG for a possible credit rating downgrade.

In a recent investment note Moody's said FMG's depressed operating cash flow had combined with falling iron ore prices to raise "material challenges".

Speaking to ABC Rural after the cutbacks WA Mines Minister Norman Moore said he was confident FMG and the wider iron ore sector would return to strong growth.

"FMG have a number of debt issues, which relate to the very high borrowings they've had to undertake because of the massive growth they've undergone," he said.

"However, all of the commentators and all of the producers I talk to suggest that this is a reasonably temporary aberration, and we'll go back to growth in due course."

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