Iron Ore Price, page-18

This week, we look across the Pacific Ocean to the country "down-under" forYankee bonds issued by an Australian iron ore mining company who has risen to prominence in the past six years. Fortescue Metals Group (OTCPK:FSUMF) has had a meteoric rise, with EBITDA increasing over 400% since 2010.

Since its founding in 2003, and shipping its first iron ore in 2008, Fortescue has become world's fourth largest iron ore producer.

This iron ore powerhouse recently completed a US $9.2 billion planned expansion to triple production, ahead of schedule. Fortescue ships the majority of its iron ore to China, where it is an essential ingredient in the manufacturing of steel, an essential building block for construction and infrastructure projects.

Its last two reported quarters, its production numbers surpassed its annualized target goal of 155 million tons, all while continuing to bring down production costs by almost 30% in the past fifteen months.

Additionally, the company has retired early US $3.6 billion of bond debt since November 2013, providing annual interest savings to the company of US $330 million.

These 8.25% coupon Yankee bonds issued by Fortescue are currently selling at a nice discount and indicating over 10½% yields. Given that Fortescue has the option to begin redeeming these bonds as early as November 2015, and that it has aggressively pursued debt reduction, the actual yield for these notes could be noticeably higher. For these reasons, we are adding them to our FX1 andFX2 portfolios.