Fortescue Metals has gone into a trading halt, as discussions continue with its bankers about potentially waiving some of its debt obligations.
Fortescue Metals Group (FMG) has also rushed to reassure investors that it is currently in full compliance with its debt obligations to banks.
The stock exchange asked Fortescue for a "please explain" after a dramatic drop in its share price yesterday - the price plunged 14 per cent, mostly in the last half hour of trade.
Late yesterday, Fortescue confirmed media reports that it was seeking possible relief from some of its debt commitments if those obligations were threatened by continued weakness in iron ore prices.
"Fortescue is in the process of talking to its lenders about potential waivers in the event that covenants are put under pressure by extended volatility in the iron ore market," the company said in a statement to the share market.
"The company has a supportive banking group and this is a prudent measure that has been taken well in advance of the next reporting date and in response to market volatility." The next review of the miner's debt covenants is on December 31, and FMG is attempting to cover itself ahead of time should market conditions mean it is in breach of lending agreements on that date.
Other than the negotiations with its bankers and the sliding iron ore price, FMG said it had no other explanation for the share slump.
Senior resource analyst with MineLife, Gavin Wendt says no-one can be sure what will happen next.
"Anybody that says they know is fibbing because it really depends on the iron ore price," he cautioned.
"A company like Fortescue doesn't have the luxury of being a low-cost producer.
The company is in the lap of the gods.
If iron ore prices go up, it'll provide them with some breathing space, if iron ore prices stay low and continue to fall then um, you know, it could be a pretty ugly ending for Fortescue.
"A lot of it will depend on lenders and whether they're prepared to be flexible." There is no shortage of pessimistic forecasts surrounding FMG - it has been that way since Andrew Forrest started the company.
It is the company's level of debt that is causing the current concerns.
"Investors are concerned that profits are drying up much faster than anyone expected," said mining and finance analyst Tim Treadgold.
"There is far too much debt at a time of global uncertainty, and Fortescue is expanding into a contracting market.
"It's taken on a lot of debt at a very difficult time and it may well have trouble servicing that debt." Far from reassuring investors, Mr Treadgold says its recent move to sack around a thousand workers and sell its power station are signs of weakness.
"I think you have to say the company is under stress.
I don't think you can go as far to say the company is distressed, but there is obviously a lot of pressure inside the company," he observed.
"You don't sack 1,000 people, and sell valuable assets such as your power station, and have senior executives taking haircuts on their salary packages without there being a lot of pressure inside."