Fortescue Metals Group Limited (FMG) is one of the prominent companies of producing iron ore located in the Pilbara region of northern Western Australia. In Australia among all the resources companies, it is on the fourth largest position. It is also considered as the largest purely iron ore mining industry in Australia. There are two production sites currently operating specifically Christmas Creek mining projects, and the Solomon Hub and Chichester Hub. Company is planning to develop the third area of operation i.e., Western Hub are currently in implementation stage. The average target of the company is to meet at least 155 million tons per annum production. This company embraces the updated standards and practices and applies these in an effective manner in order to enhance their production.
Specifying events in Fortescue
In 2009, BC Iron and Fortescue endeavor the strategies together in which Fortescue contributed towards providing the shipping services to the JV whereas BC Iron deals with mining, trucking, screening and crushing. BC Iron is a small company with iron ore deposits located at Nullagine.
In 2017, Fortescue looking to expand their production in metals and minerals in South America and Australia. A highlighted service of interest includes lithium, gold and copper.
Fortescue purchased the 15% of Atlas Iron which is a junior iron ore miner in June 2019 hence bringing the ownership stakes up to 20%. This contributes to access better port capacity and also allow the enhancement in the production of lithium.
Company is located at Point Anderson near Port Hedland consisting of a 260 km private railway, a mine and a new port. There is a flyover over the Mount Newman railway and BPH Billiton railway’s crossing. After the construction started, in May 2008, the “first ore on ship” on the line transpired.
240-wagon iron ore trains are among the bulkiest trains in the world. They are up to 2.5 kilometers long and carry 29,000 tons of ore. Availability of railways for other miners is free. Commercial agreement has signed to use the port and railway line by the Atlas Exports. BHP Billiton railway is another iron ore parallel railway over 100 kilometers. BHP declined to access this line by Fortescue.
Financing Policy and Working Capital Investment employed by the company
Day by day trading operations of is known as working capital. To meet the obligations, higher level of current assets is require by the company. The working capital ratio and current ratio in many finance assignment help is similar indicating the firm’s ability in order to satisfy its obligations. The company has strong short-term liquidity of working capital as per the computation based on the past years. Increment in the current assets is paid till 2015 depicting the company’s expansion. The increment and decrement of the current liabilities in the five years are mentioned in the following table.
|Working capital= CA-CL||1,484.64||2,423.72||1,281.32||2,397.14||1,062.48|
|Current ratio= CA/CL||1.708002||2.589817||1.369113||2.090639||1.48286|
When a large amount is blocked up in inventory, the ratio of working capital is under problem. The quick ratio has been estimated indicating that the company has a standard quick ratio of 1:1. Except 2014, in all the years ration is beyond 1:1 representing $1 of current assets for $1 of current liabilities.
Capital Structure Policy employed by the company
Investors are attracted by the size of the Fortescue Metal Group Limited stands at A$10,897.02. The company is stable and strong enough. The obligation is increasing and decreasing from the past five years. But, it reduced from $12,257.81 to $8992.73 in the past 12 months due to paying off the debts.
Debt-equity ratio properly stated the capital structure of the company. Over a period of five years, the debt-equity ratio increased. Due to company’s huge business, the ratio of 0.76 would not be a problem and can be able to precede payments in cooperative situations.
In the previous four years, company’s total revenue increased. The company’s net profit observed a great fall due to the reduction in the debt level. Due to its huge infrastructure and great policies, it can certainly cover up the payment of interest.
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