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Arrium’s cash flows to lower debts

Speaking at its annual general meeting on Monday, Arrium’s (ASX: ARI) (formerly OneSteel) chairman Peter Smedley expressed his confidence that “huge” cash flows will be generated in the coming years as a result of its acquisition and growth strategy, which will enable it to lower its level of debt.

Although no firm financial guidance was provided, the diversified miner’s shares soared 12c or 7.8% yesterday after Smedley stated that the group’s significant investment project is now complete and starting to come to fruition. Now possessing “12 million tonnes of 13 million tonne capacity at the port”, the company has “huge cash generation that is able to address the question of net debt”, which stood at just over $2.1 billion as at 30 June 2013.

Smedley, who will step down from his position at next year’s AGM, also confirmed that the mining consumables businesses continue to “perform well” whilst the outlook also remained positive.

Foolish takeaway

Arrium, like other iron ore miners including BHP Billiton (ASX: BHP), Rio Tinto (ASX: RIO) or Fortescue Metals Group (ASX: FMG), are benefitting from the high level of resilience in the commodity’s price. Should demand from China remain strong, revenues and profits could certainly climb higher, however, there are still strong headwinds facing the sector which investors may also choose to avoid.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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