S&P upgrades Fortescue outlook

Ratings agency lifts outlook on improving production volume and reducing costs.

Ratings agency Standard & Poor's has upgraded its outlook on Fortescue Metals Group Ltd because of its improving production volume, reducing cash production costs and forecast low capital expenditure.

The agency revised the outlook on Fortescue's BB- long-term rating to stable from negative, saying it expects the company's weak credit metrics will recover in fiscal 2014.

The revision does not factor in a potential sale of The Pilbara Infrastructure Pty Ltd.

S&P said it would consider raising its rating if the company maintains a disciplined approach to capital management, divident payments and funding for expansion.

But a significant weakening in iron ore prices, a delay in production ramp-up or more aggressive than expected growth aspirations could exert negative pressure on the rating, the agency said (see Tim Treadgold's High costs tarnish Fortescue's appeal).

S&P affirmed Fortescue's BB- corporate credit rating, BB senior secured debt rating and B senior unsecured debt ratings.

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