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CASE STUDY: Commodities Risk Management

Commodities Trading, Debt Reduction and Bespoke Solutions

Tags

  • Australia
  • China
  • Commodities
  • Resources, energy and infrastructure
  • Risk Management

“ANZ’s knowledge of our market both in Australia and China meant they were able to help us retain control of our product when prices were declining.”

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When iron ore prices fell sharply in 2014, we were already well into a three-year process to triple production. Not only did we have a large US$ debt outstanding with first repayments due in 2017, we wanted to reduce our leverage, smooth our debt amortisation profile and maintain our BB+ S&P rating - all at the same time.

As we already had a prepayment facility with ANZ, ANZ Commodities Trading stepped in and signed an additional purchase agreement for deliveries of iron ore over a two-year term in return for an upfront payment.

Because they understood our market, how in businesses like ours the marketing and treasury departments interact, and our needs at a macro and transactional level, they were able to analyse our commodity flows and create a bespoke, holistic solution that was oversubscribed within a three-week period.

Not only did they made it possible for us to retire our high priced debt and provide a liquidity buffer against any further price deterioration, they managed to maintain our relationships with known parties and marketing control of our product.

Ian Wells
Company Secretary, Fortescue Metals Group

 

About Fortescue Metals Group

Fortescue Metals Group is a global leader in the iron ore industry, recognised for its culture, innovation and industry-leading development of world class infrastructure and mining assets in the Pilbara, Western Australia. Since it was founded in 2003, Fortescue has discovered and developed significant iron ore deposits and constructed some of the largest mines in the world.

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