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Fortescue chairman Andrew Forrest and chief executive Nev Power.

Fortescue continues talks on debt crunch

A fresh capital raising and further asset sales are believed to be among the options being evaluated by iron ore miner Fortescue Metals Group, which has halted trade in its shares as negotiations continue with banks over restructuring its heavy debt.

The company placed its shares in a trading halt this morning, after a 14 per cent plunge in its stock yesterday, losing $1.5 billion in market value.

Most of the plunge came in the last hour of trade yesterday after a media report that Fortescue had asked its lenders to waive its debt covenants for the next 12 months.

Late yesterday, the company said it was discussing "potential waivers", and today said it had held more talks with its bankers and that the discussions had progressed well.

Concerns about Fortescue's ability to pay back its gross debt of about $US9 billion ($A8.5 billion) have come to a head in recent days, after the iron ore spot price temporarily fell below $US100 per tonne ($A95), casting doubt on the company's profitability.

The company has resisted raising money by issuing stock, preferring instead debt financing.

It appeared to be still resisting a capital raising this afternoon, with a report saying chairman Andrew Forrest was in talks with Kerry Stokes' Westrac to save Fortescue's balance sheet through a $1 billion sale-and-leaseback deal of rolling stock and heavy machinery.

That followed the $300 million sale of a power station at one of Fortescue's mines last week, along with delaying $US1.6 billion ($A1.52 billion) of capital expenditure and cutting 1000 jobs and operational costs by $300 million.

CommBank Global Markets Research said in a note to clients that a Standard & Poor's report this week reported that Fortescue was at "serious risk of breaching its banking covenants", and placing it on CreditWatch with negative implications was serious.

"In our view, this puts further pressure on FMG (Fortescue) to consider raising equity ... FMG should seek additional equity now," it said.

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Share Price

Closing price for the last 90 trading days
Source: Morningstar

BN30 Index

Index = 100 as of 4 Jan 2016
Source: Morningstar

Total Shareholder Return as at 30/04/18

1 year TSR5 year TSR
125thAtlas Iron88%-48%
157thMineral Resources74%18%
200thNorthern Star Resources52%61%
239thSouth3241%0%
510thFortescue Metals Group-8%10%
721 WA (and selected non WA) listed companies ranked by 1 year TSR relative to other companies with similar revenue
Source: Morningstar

Share Transactions

20/02/18
$0 Issued
19/02/18
$0 Other
19/02/18
$0 Other
Total value as at the date of the transaction
Source: Morningstar

Revenue

1st-Fortescue Metals Group$10,999.7m
2nd-South32$9,392.9m
4th-Mineral Resources$1,470.4m
5th↓Atlas Iron$896.6m
6th↓Northern Star Resources$850.6m
506 listed resources companies ranked by revenue.
Source: Morningstar

Remuneration from Fortescue Metals Group

579thMark Barnaba$223k
683rdSharon Warburton$170k
743rdElizabeth Gaines$161k
Ranked by total remuneration from all listed WA companies

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