Warning bells on debt for Forrest

IRON ore prices have slumped close to levels that threaten the debt position of Andrew Forrest's Fortescue Metals Group, with analysts declaring the stock ''not for the faint-hearted''.

JPMorgan's warning that Fortescue may have to conduct an equity raising or sell assets if current iron ore prices persist for 18 months came with the rider that the bank continues to recommend the stock based on expectations the iron ore price will rebound.

The focus on Fortescue intensified as the benchmark iron ore price continued its slide towards $US117 per tonne yesterday: its lowest ebb since October 2011.

At these levels the commodity - which is crucial for federal government revenues - is 13 per cent lower than a fortnight ago and 38 per cent below last year's high of $US191 per tonne.

The price is now testing levels that are considered to be its ''floor'', meaning that a sustained slide towards $US100 per tonne could force a rethink on a major assumption that underpins the iron ore industry: that large numbers of high-cost Chinese producers keep the price above $US110 per tonne.


Topics:  debt fortescue metals

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