There has been a lot of talk about when FMG become "Debt free"....

There has been a lot of talk about when FMG become "Debt free". I doubt this will ever happen because that just creates a lazy balance sheet which is poor capital management. There is no doubt that now that they have surpassed their target gearing ratios they will set far more aggressive targets, perhaps 15 - 20%, where debt servicing is not an issue in times of lower prices and deploy capital in other ways.



Todays West Australian business section has Nev quoted:

"at iron ore prices around two year highs and cash production costs still falling, Fortescue is still likely to be in a position to wipe out the US $2 billion still owed on debt that falls due in 2019 in short order.
We can repay that at will and that's what we've been doing"

"Mr Power said Fortescue would consider refinancing longer term debt at that point but a shift in dividend policy would be considered after it closed out it's full year accounts.

He all but ruled out other capital management initiatives, such as a buyback, saying the company did not believe they contributed to long term share holder value. And Fortescue was unlikely to splash cash on buying other producing assets, Mr Power said, preferring its strategy of relatively low-key grassroots exploration to deliver new mining operations in the long term.

We're not driven to grow for growths sake. we're driven to grow if we can see the sort of value we want to capture for shareholders he said"




So what does the future hold for us shareholders? Certainly the cash cow will continue to pay down debt to whatever their comfortable level is then organic growth and increased divvies will follow.

In other words we will look back on a circa $7 share price and regret not buying more in my opinion.