UPDATE 2pm: Fortescue Metals Group has flagged the first step in a plan to begin reducing its massive $11.7 billion debt pile.
The company this afternoon announced the redemption of $140 million in preference shares it issued in September 2008 as part of its original project financing structure.
"The preference shares, which have a fixed coupon of 9 per cent, will be redeemed in their entirety on Monday, November 11, at the principal value plus any accrued unpaid interest," the company said in a statement.
Chief financial officer Stephen Pearce said the redemption of the preference shares represented a key milestone for Fortescue and reflected the company's strong cash balance and improved operating margins.
"The redemption of the 9 per cent preference shares removes Fortescue's most expensive piece of debt and represents the first step in the company's strategy to reduce gearing levels," he said.
"Fortescue's strong financial position, together with the sharp reduction in capital expenditure as we near the completion of our $US9 billion expansion to 155 million tonnes per annum, has enabled the company to begin debt repayments this year."
The company said it had significant flexibility with its debt capital structure and balance sheet, allowing early debt repayments or extension of debt maturity dates through refinancing at Fortescue's option.
Last month, Fortescue reported a $US1.56 billion full-year net profit, up 12 per cent on the previous year.
The company reported a cash balance of $US2.2 billion at the end of June after paying a final dividend of 10 cents a share.FMG shares were up 4.5 cents to $4.625 shortly before the close of trade.