Ann: Debt reduction to continue as FMG recognised as lowest cost, page-27

"...the market is concerned about gross debt not net debt

Net debt after paying back $700,0m in Sept was 33.00% but yet no credit upgrade, gross debt gearing of 30.00% will move the sp and credit rating"


I believe you are tangling up gross and net debt with gearing ratio and net gearing ratio.

I can't agree with your assumption that the market is concerned about gross debt not net debt. I think the market can be wrong but it is capable of understanding the percentage debt matters not just the nominal amount.

That the open market buys FMG 6.87% unsecured notes at above par suggests to me that the open market is not concerned about FMG's credit rating any longer. That bugbear is largely gone, imo.

The ratings agencies have upgrade FMG in the last year, they (at least one of them) have said they would l do so again with further debt reductions, but (imo, now) I don't think the ratings agencies will care whether the debt is reported as gross or net very much.

"I doubt that io price will fall back to $50,0mt next month or next qtr"

So do I. But it might. It might fall to US$55, sometime before Mar 2018. As recently as the end of November it was reported that Nev thought 50 -60 was plausible longer term. Assume only that that is true and it makes it prudent for him to think through what the ramifications of that would be.

It isn't necessary to wait until something unpleasant happens to renegotiate finances. It possible for FMG to regotiate from a position of strength and to proactively look for better rates even if nothing unpleasant happens.