Australian mining giant Fortescue Metals Group on August 6 announced that it had inked a deal for a US$1.5 billion dual-tranche syndicated term loan and revolving credit facility.

The deal comprised of a US$750 million term loan and a US$750 million revolving credit facility, maturing on December 31 2013. The company says the new facility is "structured for short-term flexibility," and "provides funding certainty".

The facility came three weeks after the iron ore producer unveiled blowout costs of US$600 million as they expanded operations, meaning that the company would be exploring additional borrowings. Fortescue intends to triple its estimated 2012 production rate to 155 million tonnes per annum (mtpa) by mid-2013. The facility is significantly larger than the US$1 billion loan that Fortescue chief financial officer Stephen Pearce initially indicated it was eyeing.

Mining companies have been struggling of late as production costs rise but iron ore prices slide. The iron ore benchmark rate on August 13 plunged to its lowest in 31 months, down 24% from this year's peak in April. While Fortescue remains largely positive on China's steel production, the facility may also beef up its cashflow while iron ore markets recover.

According to Pearce, "The facility provides a short-term funding solution to support the company's expansion to 155 mtpa. The facility offers funding certainty through the term loan tranche and the revolving credit tranche provides additional funding flexibility through to completion of the 155 mtpa expansion and subsequent consolidation of operations."

The Chichester Hub is on target to meet the scheduled ramp up by the end of 2012 and Pearce says the company is completely focussed on delivering the 155 mtpa expansion by mid-2013. According to the company's 2012 full year results, Fortescue shipped 55.8 million tonnes in 2012, up 38% year-on-year.
Bank of America Merrill Lynch acted as the sole underwriter and arranger for the facility. - NP