fmg delivers $1bn 1half-year profit, page-4

Vayama, read note 12 (i) on page 23 of the financial report. It relates to a $100 million loan whose interest payments are based on revenue generated from the cloudbreak mine until 2018. In June the provision for future interest payments on this loan based on market forecats at that time (i.e. the peak of the market) were revised upwards in line with accounting practices to $4Bn, causing FMG to report a loss after generating an operating profit of a few $100Mn. Now that the market has tanked the forecast revenue and therefore provision for interest has been reduced in line with accounting standards to $2Bn, an this difference has helped result in the profit for FY 2008/09 H1.

Interestingly I do note that FMG has deferred payment of the interest due at December until July 2009, thereby incurring 9.5% interest until paid. Looks like a measure to conserve cash flow, although we are talking about $35Mn of interest so cash flow still looks tight till mid-year.