Quite possibly the attached article has already been posted. I...

Quite possibly the attached article has already been posted. I repost only because I am intrigued by the FMG spokesman's statement that "Fortescue remains in a strong financial position,". I could imagine "financially sound" - though even then that might require a Spielberg size imagination - but to say it is in a strong financial position? I don't know what others feel about it, but FMG, IMO, needs to be a little more careful as to how they word their releases.


Fortescue plunges 21pc on concerns over finances

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Sarah-Jane Tasker | December 23, 2008
Article from: The Australian

FORTESCUE Metals Group stock crashed 21 per cent yesterday as speculation grew about its cash position following its decision to issue shares to pay a contractor.

The Pilbara-based iron ore miner's stock was the worst performer on the Australian market, which was down 1.6 per cent.

Fortescue shares plunged 20.6 per cent, or 44c, to $1.71 -- off an intraday low of $1.70.

Analysts suggested that its surprise move to issue shares to pay a contractor raised suspicion about its cash position, leading to a sell-off in its stock.

The Weekend Australian reported on Saturday that Andrew Forrest's company had issued 1.55 million ordinary shares to raise $3.65 million to pay contractor bills.

A spokesman said the shares were issued to a contractor in lieu of a cash payment and that the company might do similar deals in an effort to preserve cash.

The company has also had close to $US1.5 million of its cash frozen by a US court in relation to claims lodged by ship owners seeking more than $US130 million in damages for suspended contracts.

But the company denied yesterday that it had any cash problems.

"Fortescue remains in a strong financial position," a Fortescue spokesman told The Australian.

The miner's shares have had a volatile year since reaching a high of $13 in June.

The company blamed short selling for the rapid drop in share price, but plunging commodity prices and tightened credit conditions had further weighed on Fortescue's value.

Its stock did receive a lift earlier this month when it surged as much as 42 per cent, as speculation grew BHP Billiton or Chinese investors were eying a stake in the miner.

But it has fallen from the $2.50 reached earlier this month as the rumours abated and concerns were raised about its funding position.

Patersons Securities head of metals and mining Alex Passmore said in a client note yesterday that despite negative headwinds, the share price sell-off was overdone.

"Fortescue continues to lose market confidence, with rumours of difficulty selling iron ore to major customers in China and the issue of stock in lieu of cash to contractors highlighting funding concerns," he said.

"We understand the payments were given in consideration for cancelled contracts for goods and services relating to the expansion of production capacity to above 55 million tonnes per annum."