International credit ratings agency Fitch Rating has announced that it has affirmed Australia-based miner Fortescue Metals Group Limited's long-term BB+ rating with a negative outlook.
In its update, Fitch noted that the rating affirmation comes in spite of the decline in market prices for iron ore, and reflects the company's strong progress in cost reductions. However, the negative outlook continues to reflect risks to the company's credit profile should iron ore prices underperform against Fitch’s current expectations. Fitch expects Fortescue's cost reductions to be sustainable at least over the next 24 months. According to Fitch, lower costs are due to a combination of product blend and upgrading of ore processing facilities, allowing for lower-grade ore inputs to be used while sustaining output quality and the company has delivered higher efficiencies from its existing port and rail infrastructure and increased its port capacity. In addition, lower crude oil prices have contributed to a reduction in operational and shipping costs, and a weaker local exchange rate has also supported lower costs.