IRON ore giant Fortescue Metals Group has borrowed US$1.5 billion to cover its expansion costs in the Pilbara region of WA.
The loan comes one month after Fortescue announced it would need to return to debt markets following an increase in project costs.
The dual tranche credit facility will mature on December 31, 2013 and comprises a US$750 million term loan and a revolving credit facility of US$750 million.
Fortescue chief financial officer Stephen Pearce said in a statement that the loan would enable the company to meet its financial obligations and continue development at projects such as the Chichester hub expansion.
“The facility provides a short-term funding solution to support the company’s expansion to 155 million tonnes per annum,” he said.
“The facility provides funding certainty through the term loan tranche, and the revolving credit tranche provides additional funding flexibility through to completion of the 155mtpa expansion and subsequent consolidation of operations.
“The Chichester Hub is on target to meet the scheduled ramp up by the end of 2012, and we remain completely focussed on delivering the 155mtpa expansion by mid 2013.”
In a company review, Fortescue confirmed a US$200 million increase in spending for the port and rail expansion, a US$100 million decrease for Chichester projects and a US$500 million increase at the Solomon project, increasing the infrastructure budget from US$8.4 billion to US$9 billion.
Australia is the world’s biggest iron ore and coal exporter, but rising wages and machinery costs have hindered Fortescue’s ability to meet the growing demand in the Asian market.
In the quarter ending June 2012, Fortescue delivered record shipments of 17.8mt of iron ore – a 42 per cent increase on the previous quarter. Bank of America Merrill Lynch is the underwriter of the loan.