China's growth benefits Australian miners

China's ongoing urbanization drive and continuous economic growth will keep bringing stable demand for Australian iron ore, said a top official at Fortescue Metals Group Ltd, the country's third-biggest iron ore producer.

"Although China's economic growth is slowing down, the 7 percent growth rate is still very strong," said Neville Power, chief executive officer of FMG, which is also the world's fourth-largest iron ore miner.

A manager inspects ore processing equipment near a mine of FMG, the world's fourth largest iron ore miner. Despite an economic slowdown, China's advancing urbanization and the growth will continue to create demand for Australian iron ore. [Photo / China Daily]

Power added that he believes that Chinese demand for iron ore will continue to increase.

Regarding the company's debt load, he also expressed confidence in the future.

"We're not having any pressure on financing," he said. "Our balance sheet is very strong and we have no time pressure on repaying the debt."

During the last Australian fiscal year — from July 1, 2012 to June 30, 2013 — FMG's fixed-asset investment reached $6.3 billion, the highest level since the company's establishment in 2003.

The company's debt is now at $12 billion, with $2 billion of cash in hand. However, FMG doesn't have any debt to repay before November 2015, according to the company.

Meanwhile, the company's production capacity is growing rapidly and the contracts with Chinese steel companies are steady, which can generate cash, industry observers said.

"Costs can be an issue for a company like FMG, which is highly leveraged, but their production volume is going up, which means that if prices decline they can still be profitable," said Sebastian Lewis, editorial director of Platts China, a commodities information provider.

In the last few months, international iron ore prices have been falling, and most analysts and industry players believe that they will continue to drop until they reach a reasonable level.