Despite buying itself $US5 billion ($4.8 billion) worth of breathing space on its balance sheet through a debt reconstruction last month, Fortescue Metals Group is moving to get its ambitious growth plans back on track, offering prepayment deals to iron customers in order to pull more development capital.
It is understood Fortescue has approached a number of its iron ore customers, seeking $US100 million to $300 million prepayments for iron ore in order to help bring construction of its $1.1 billion Kings mine back on line before the end of the year.
Sources say the company has approached existing customers and major trading houses, offering off-take deals for upfront payments.
A Fortescue spokeswoman confirmed the company had received "exceptionally strong interest from customers who are keen to secure long term supply arrangements".
"This interest may be in respect of projects currently under construction or future iron ore development projects," she said. "This may include . . . prepayments . . . consistent with arrangements we've had in the past."
Nearing the peak of its capital spending program, Fortescue is understood to have also asked the WA Government for temporary relief on royalty payments for two quarters, a move that could free up as much as $400 million for expansion.
Fortescue has also been open about plans to sell more assets, flagging the possibility of offloading power stations, mining camps and other non-mining infrastructure.
Fortescue was typically bullish about its plans on a site visit last week but analysts still emerged with doubts about its production forecasts. In a note yesterday, Deutsche Bank's Paul Young said Fortescue's target of exporting at a rate of 115 million tonnes a year by July 2013 "remains highly aggressive".
"The biggest challenge to hitting targets appears to be mobilising and staffing the mining fleet, and then scheduling and hitting target utilisation rates," Mr Young said. He said that to hit these targets the company needed to move more than 150 pieces of equipment in the next three months.
"We walked away with the same concerns as before, those being with the aggressive mining ramp up and high costs, however we were impressed with . . . progress at both Solomon and Christmas Creek, but still unconvinced that the operating cost targets can be achieved."Fortescue shares closed at $4.10 yesterday, up 7¢, or 1.7 per cent.
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