Ann: FY15 Half Year Results Presentation, page-154

The $1.2b prepayments is a really big concern and is technically on the same side of the ledger as the loans/notes are.

The balance sheet splits the prepayments between current & non-current liabilities

But since inception prepayments have been received, as long as future prepayments are received as part of their trading strategy theeffect will be negligible.

Should the customer cease prepaying, then free cash flow would be seriously effected as their production would need to fulfil the prepaid orders first with no actual cash revenue receipts

$1.2b in prepayments equates to around 60.0mt, if my iPhone calc is right, not the end of the world, but could be an issue with cash flow and debt repayments if IO price remains at these levels or worse still declines

An interesting point made inthe article is "Chinese inc mills supporting FMG" which makes sense as they want FMG to survive to reduce the hold that the big 3 have, should FMG collapse the big 3 because of reduced supply and competition would once again have the upper hand over the Chinese steel mills and push IO price upwards

At the moment China has the upper hand