Fortescue Metals Group has settled a long-running dispute with Leucadia National Corporation, agreeing to terms to repay $US715 million in unsecured loan notes.
Fortescue said the agreement would release all parties from any liability relating to the notes and settles any ongoing court proceedings.
"Depending on future iron ore prices, interest payments on the Leucadia Note would have increased considerably over coming years with the ramp up in production at Christmas Creek and Cloudbreak," chief executive Nev Power said in a statement.
"This agreement significantly reduces the overall cost of debt for the company, reflecting Fortescue's continued commitment to profitability."
The agreement is conditional on completion of Fortescue's recently announced $US4.5 billion secured credit facility.
The dispute stemmed from Leucadia's purchase of $US100 million in unsecured loan notes in July 2006, with a maturity date of 2019.
The notes have proved highly profitable for Leucadia as the iron ore price soared to record highs for much of the past four years.
The notes earned more than $US220 million ($A210.82 million) in royalties in the past financial year alone, while the Leucadia loan notes had a book value of $US897 million ($A859.57 million) at June 30, using a 42 per cent discount rate.
The royalty payments have received more negative attention by investors as iron ore prices plunged to around $US100 ($A95.83) a tonne in recent weeks, shrinking Fortescue's margins to near unprofitable levels.
The company refinanced its debt this week, pushing out repayments to November 2015, but increasing overall debt by $US900 million ($A862.44 million) to $US12.7 billion ($A12.17 billion), about $US6.7 billion ($A6.42 billion) of which is undrawn.
Fortescue chief executive Nev Power wants gearing - the debt to equity ratio - of between 30 and 40 per cent by the 2014 financial year.
However, Patersons Securities analyst Alex Passmore doubts the miner's ability to do that, saying on that the current level was 162 per cent.
Fortescue also announced today that it had put first ore through a second train unloader at Port Hedland.
The extra train unloader is a key part of Fortescue's expansion in port infrastructure capacity to 115 million tonnes a year.
Fortescue shares closed nine cents, or 2.4 per cent, weaker at $3.60, with weak manufacturing data out of China prompting falls across resources stocks.
