Fortescue Metals Group Ltd. said Dec. 16 that it is paying off a further US$1.0 billion worth of debt, which will slash the Australian iron ore producer's annual interest payments by around US$38 million.

Importantly for the company, this payment, which will be made on Dec. 23, will cut its debt-to-equity to below target.

"Fortescue's nearest debt maturity is in June 2019 and is now less than US$2.0 billion, with gross gearing falling below our targeted 40% level once this payment is made," CEO Neville Power said.

The company also still has US$2.16 billion worth of senior secured notes and US$478 million worth of senior unsecured notes due 2022.

According to recent Metalytics data, Fortescue's aggressive debt reduction strategy has resulted in the company beating Rio Tinto and BHP Billiton Group to become the lowest cost seaborne supplier of iron ore into China.

Fortescue exited the 2016 financial year with a cash cost delivered to China of US$23 per wet tonne.