Major miners Rio Tinto and Fortescue Metals Group have both moved to reduce their debts as they face a prolonged downturn in commodities prices.
Fortescue told the ASX on April 27 it had initiated a US$577m repayment of debt by issuing a voluntary redemption notice to holders of the 8.25% Senior Unsecured Notes due in 2019.
By redeeming the US$577m of outstanding notes ahead of time, FMG says it will save US$48 million per annum. The iron ore miner made the transaction using cash on hand.
“This debt repayment delivers on our sustained commitment to reduce all-in costs, further generating strong cash flows and continuing to reduce our debt,” Fortescue boss Nev Power said.
FMG has now repurchased US$1.7bn of its debts in the last 12 months, and US$4.8bn in debts over the last two and a half years.
Chief financial officer Stephen Pearce said the company aimed to continue repaying debt using accumulated cash balances and operating cash flows.
A day on from FMG’s announcement, Rio Tinto accepted for purchase a total of US$1.36bn in debt, following a week long Any and All Offer put to market on April 21. The original offer aimed to buy back notes worth up to US$1.5bn, but Rio settled for a lower figure by the end of the offer period.