S&P Global Ratings raised the issuer credit rating on Fortescue Metals Group Ltd. to BB+ from BB on the back of a further reduction in absolute debt.

The outlook on the long-term rating is stable, reflecting the rating agency's expectation that the Australian iron ore miner will operate within its financial policy and will maintain its growth strategy in line with the rating level.

S&P also raised the senior secured rating to BBB- from BB+ and the senior unsecured issue ratings to BB- from B+.

"The company's credit metrics are still sensitive to iron ore prices. However, we believe the additional debt repayment has provided sufficient buffer for Fortescue to withstand moderate volatility in its key earnings drivers," S&P said in its Dec. 19 research update.

The rating agency expects Fortescue to further reduce its production costs to between US$12 per wet tonne and US$13 per wet tonne through fiscal 2017 and anticipates its all-in breakeven costs would be about US$30 per dry tonne at the end of fiscal 2017.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.