FMG - Fortescue Ltd

[SenTineL]

Huge volume today, means the big boys are getting back into this and are serious.

Probably why the price is affected so much also, BHP/RIO deal is also probably starting to look much more attractive for FMG and other parties are probably working this out.

I'd like to hear WBII's analysis

 

[happytown]

rumours doing the rounds (rumourtage anyone) that chinalco is looking at making a bid for fortescue, fmg responded to the speeding ticket with dunno

note rumours only and fmg have said they are not aware of any information etc, etc

cheers

 

[persistentone]

Does anyone have a link to the CLSA analysis of its recent downgrade for FMG?

Obviously the stock is up today on rumors about possible Chinese investment, which may or may not materialize in the next few years. I would like to have some idea of how to value FMG on fundamentals as I have not studied them before. Does anyone know of a good analyst report?

 

[njc.corp]

BCI is only a minnow. Whatever it does should not have affected FMG's sp by very much.

I have no idea on what is driving FMG up by so much, all I have to say is the market will do what the market will do.

Maybe it is just taking a random walk on the wild side.

It seems that bci is a little fish but anything is better then nothing-

I find it simple but i aint going in because fmg has had a good couple of weeks-

its very simple-bhp and rio have their deal going on-

fmg got some things to do with bci,and they got their operation going and running okay-

So the Chinese got a new fish to catch-but i would like to see more of the last couple of days of people not taking profits and holding the damm stock which will sustain a good price-

But on the other hand most resource stocks are up

so its a bit of a hard one to understand-

so that leaves us to go by the current price.......

 

[MRC & Co]

Didn't that Oz Minerals takeover go through today? Probably explains the bump in the SP of FMG. Looking as a takeover target now.

 

[stompa]

so what you guys reckon heading back to the $3 mark?or a steady rise from now. looking for an entry stock

 

[NitrosOxide]

I am also looking for an entry point into FMG, was as I missed the boat @ 2.50 but 'hopeful' for a 3.20 entry point. I am curious to see how much the news from RIO will effect if at all and why.. does anyone else have any speculation as to what may have any effect negative or positive on FMG?
seems to be bouncing back up atm 3.60.

 

[renim]

BHP/RIO joint venture valued at $116billion and 120+150 mtpA? current, growth to maybe 50% more at pre feasibilty stage

FMG valued at $12billion and 25mtpA, nameplate capacity 50mtPA, growth to 200mtpa with footprint of port design (ie pass pre feasibility stage)

now these are very approximate, unsubstantiated figures, which i would love for someone to correct on this forum (they just my top of head figures)

so if FMG ramped up to its 200mtpa capacity it would be worth a LOT more (think 2/3s of BHP Tinto JV), if was at its nameplate capacity it could be at 1/5 to 1/6 of BHP Tinto (very roughly share price around $7).

if it stays at 25mtpA then it is a par value at $3.50 per share

this off course assumes everything else being equal which is obviously not true, its just back of envelope calcs.

 

[LeeTV]

Fortescue Metals’ Stock Is “Over Priced,” Morgan Stanley Says

By Jesse Riseborough


June 25 (Bloomberg) -- Shares of Fortescue Metals Group Ltd., Australia’s third-largest iron ore exporter, are “over priced” and reflect assumptions for demand, prices and production that are too optimistic, Morgan Stanley said.

“The price scenario back to a bull market in iron ore is unrealistic given the outlook for steel markets in Asia,” analysts led by Melbourne-based Craig Campbell and Cameron Judd said in a report dated yesterday. “Iron ore is heading into a period of excess supply, placing downside risk on revenues in the near to medium term.”

Fortescue, which has almost doubled this year, rose 2.4 percent to A$3.78 at 10:22 a.m. Sydney time on the Australian stock exchange. Morgan Stanley reaffirmed an “underweight” rating and a price target of A$1.08, 71 percent lower than the current price.

Perth-based Fortescue spokesman Cameron Morse said the company doesn’t comment on analyst reports.


http://www.bloomberg.com/apps/news?pid=20601081&sid=avxPpQV1QlX0

 

[renim]

FNArena had an article about FMG being a "Nigel No Friends" stock. It'll be interesting to see how it goes...

 

[LeeTV]

FNArena had an article about FMG being a "Nigel No Friends" stock. It'll be interesting to see how it goes...

Yea I read that. The 'experts' were spouting the same rhetoric last year too. FMG were up 200% not long after :

http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=1B7D6A33-1871-E587-E1FA39773AD0D15E

 

[Miner]

Extract from The Bull Newsletter

"Mark Goulopoulos, Patersons Securities


SELL RECOMMENDATIONS



Fortescue Metals Group (FMG)

The share price moved up very strongly in response to the proposed iron ore joint venture between BHP Billiton and Rio Tinto. Expect Chinese interest in Fortescue to help it expand production in future. But the stock is now overvalued for the short term."

Disclaimer : I do hold FMG

 

[LeeTV]

Interesting read(not really FMG related but the sector as a whole).

China rolls out the welcome wagons for our ore
Michael Sainsbury | June 27, 2009
Article from: The Australian
http://www.theaustralian.news.com.au/business/story/0,,25695619-36418,00.html

ONE block back from the heaving docks at the endlessly sprawling Port of Tianjin in northern China, scores of empty, dirt-encrusted tip trucks wait in line for their next load.

By twos and threes they are let through the boom-gates to the wharf, taking their place beneath one of the eight giant cranes picking up the red dirt from the hold of an ageing Panama-registered ship that has ferried 50,000 tonnes of iron ore across the ocean.

A thick patina of red dust -- which quickly covers everyone and every vehicle that approaches -- blankets the wharves.

The weatherbeaten shift workers who have toiled in freezing winter winds now work under the burning sun and into the night unloading up to 15 ships at a time. The shifts run around the clock. And the ships keep coming. Every week, dozens of ships arrive from Australia, Brazil, India and Indonesia to feed China's hungry steel mills.

But not all of it is finding its way to the mills.

Iron ore is heaping up in China, creating the world's biggest ever stockpile of the mineral.

That stockpile is now at 100 million tonnes or more.

That's the result of a combination of confidence, price and the increasingly fractured nature of the iron and steel sector in what is still the globe's key growth nation and the biggest consumer of iron ore.

In 1990, China imported 14.2 million tonnes of iron ore.

In 2002 it was taking in 112 million tonnes and last year it consumed 443 million tonnes -- about 45 per cent of the world total. That figure is widely expected to be exceeded this year. Right now, about 90 ships lie off the coast of China awaiting their turn. At Tianjin port, about 150km southeast of Beijing, it takes 20 days to get a berth.

"Business is good," truck driver Guo Jianjun says as he waits for his modest 50-tonne truck to be filled.

Last year, when the world's economy was still expanding and China was racing along at a GDP growth rate of 9 per cent, the giant nation needed iron ore to feed its steel mills. Global demand for steel -- where 98 per cent of iron ore is used -- has since fallen, in line with a general drop in demand. Yet China is importing more iron ore than ever. This year several records have been smashed as volumes have topped 50 million tonnes in each of the past three months. Even though the international steel sector is working at only 70 per cent of capacity, China's traders and steel mills defy government edicts and buy, buy, buy.

There is confidence that the steel industry has bottomed out and -- at least in China -- will show signs of recovery this year. While manufacturing remains in the doldrums, the Chinese government's 4 trillion yuan ($727billion) stimulus package has been directed at infrastructure projects -- including the $US32bn ($39.7bn) Beijing-Shanghai high-speed rail link -- that will require millions of tonnes of steel.

Indeed, over the past few weeks signs of life have been emerging. "The outlook is improving, with steel prices staying relatively strong," says Hong Kong-based Macquarie Bank China analyst Andrew Dale.

"More importantly, global steel production and demand could be entering an up-cycle with most of the global indicators looking more positive."

There has been speculation in recent months that traders were hoarding iron ore in the hope of turning a profit when the annual contract price with iron ore producers was set. But there are growing signs that the appetite for iron ore -- and the steadily rising spot price -- is driven by real demand.

Steel prices in China have risen 16 per cent from their lows and now sit about 30-35 per cent below the record peaks of last year. "We expect some normalisation in the third quarter but all the major metrics are positive," Dale says of the steel market. "Construction volumes are slowly picking up and the property sector is showing signs of life. This would be positive for overall steel demand."

All this puts a dent in the government's arguments as it belligerently holds out for a 40per cent-plus cut in contract iron ore prices for the coming year -- deeper than the Koreans and Japanese accepted last month.

On the ground, at the Tianjin docks, it is easy enough to find answers about what is coming into China. But what happens to the iron ore after that is harder to determine -- and is causing headaches at the highest levels of the government.

In Tianjin it takes about two days to unload a ship. There is no modern rail infrastructure to the wharf. Instead, a fleet of mid-sized pickup trucks, often piloted by owner-drivers, haul the ore back to the port's "warehouse".

Guo says he would be happy to work "24 hours a day" if he could. "It's been several months since I came from Jiangsu (several hundred kilometres south)," he says, estimating he can make 700-800 yuan ($127-$145) a day, minus the cost of diesel.

(continues in next post)

 

[LeeTV]

(continued from previous post)

The "warehouse" is actually hundreds of acres of open grounds a few blocks back from the ports. It houses pile after 4m pile of imported dirt. They are covered by an uneven patchwork of lurid green tarpaulins that are regularly hosed down with a sprinkler system to stop the cargo from joining the other pollutants in Tianjin's thick, choking haze.

Hou Zhiyun, from steel industry website Langsteel.com, says that, according to the latest figures to the middle of this month, there are 70 million tonnes of iron ore stored at China's ports. There are an estimated further 30 million tonnes at mills and traders' warehouses.

A warehouse supervisor, who would only give his name as Lin, says the space is constantly full as ships make their deposits and customers come to pick up their consignments. He says the tight space means that mills and traders have a maximum of 30 days to get the ore to their own warehouses around northern and central China before fines are imposed. Many smaller mills and traders choose to delay moving the iron ore out of ports, to achieve lower storage costs.

The small mills have this year been cut out of the annual price negotiations with the big iron ore producers -- Australia's Rio Tinto and BHP Billiton and Brazil's Vale. The talks have been taken over from Baosteel and other major steel producers by the government-run China Iron and Steel Association. Both the smaller steelmakers and the proliferation of traders are betting that CISA's deal won't be as good -- if they can get it -- as a deal on the spot market, which has been down as much as 40 per cent from last year.

China's authoritarian government has been struggling to maintain control over the steel sector for years. And the growing stockpile suggests its grip has been further loosened.

For more than a year, the government has been trying to force consolidation in the steel industry, rub out unlicensed traders and control imports. A strongly worded missive last June from eight departments, including the Chinese cabinet, was all but ignored. Last month came another attempt.

As in many other key sectors of "national importance", China's leaders have long wanted to create a small group of giant steelmakers that can help it better control prices. It does not want countless small mills forcing up the price by bidding against one another. In recent years, as the iron ore price has soared to record levels, mainly on the back of Chinese demand, the government has stepped up its efforts.

Instead, the opposite has happened. As big state-owned mills have splurged on infrastructure to build high-end and cutting-edge products for industries such as the depressed airline and shipping sectors, more efficient privately owned mills stepped into the breach to make regular steel products.

The global recession curbed demand for the more expensive products in the steel market, cutting the profits of industry giants and landing them with excess capacity at the top end. This handed a further advantage to the smaller, focused mills that now number in the hundreds.

Now CISA is believed to be threatening to take away up to 30per cent of the 112 official iron ore import licences. The group has succeeded in stopping most traders and mills from commenting to the media, but other than that they are getting on with their business.

Zeng Jieshen, an analyst at Mysteel.com, does not think such a cut will help. He says that since the Ministry of Commerce issued the licences in 2005, the licence numbers have dropped from 523 to 112 "but the situation wasn't improved".

"Even if they cut another 30per cent, it won't solve the problem at its roots," he says.

To make things worse, the stockpile adds a fresh and unwanted element into the simmering, long-running discussions between China's steel sector and major iron ore producers. These have a deadline for a new benchmark price of next Tuesday, June 30.

But the winds of change that are sweeping through the iron ore and steel sectors mean this benchmark system, which sets iron ore import prices each year, is under perhaps terminal threat. At the Australian end, BHP has been pushing hard to introduce an index system. In China, Xu Tao, vice-general manager of Jianlong Co, a mid-sized mill in Tangshan that makes 2 million tonnes of steel each year, says the import system is in chaos.

"According to the country's policy, importers should charge a 3-5 per cent agents' fee only, but in reality the policy became a blank piece of paper," he told China's CCTV. Xu says his company is being forced to pay 1400 yuan for every tonne of iron ore, even though the contracted price is only 700-800 yuan.

"We're not included in the negotiations, nor can we share the long-term contract price, and we have to buy from the real market at a higher price."

Earlier this month, unconfirmed -- and undenied -- rumours swept the Chinese market that Brazilian iron ore behemoth Vale had signed a secret contract with 38 mid-sized and smaller mills around China, causing further fury at CISA.

Chinese steelmaker Sinosteel said this week that 70 per cent of the country's iron ore was now being imported. Now that the mineral's price has fallen back -- albeit only to 2007 levels -- its superior quality is triumphing over the local iron ore from high-cost, low-grade and dangerous Chinese mines, many of which have been forced to close.

This week, like a miracle answer to CISA's prayers -- only days before the benchmark negotiations are due to be completed -- China announced it had found Asia's largest iron ore deposit in the northeast province of Liaoning. But many are sceptical about the time -- three to four years -- and cost it will take to develop the exceptionally deep deposit, particularly with China's restrictive rules on offshore miners and their superior technology exploiting homegrown resources. Another wrench was tossed into the system this week when the US and Europe lodged a complaint with the World Trade Organisation about China restricting exports on certain minerals and chemicals used in steelmaking.

 

[nomore4s]

For all the FMG lovers out there:

Weekly chart.
Breakout of triangle on increased volume, now testing breakout level on reduced volume, target is around $5.50 but more realistic target is probably around $5.00. Pretty textbook pattern really.

Daily chart.
In Wykcoff terms a nice jump across the creek (or SOS) and now a last point of support. All very bullish atm imo.

Probably depends on what the market decides to do now though. If the market tanks FMG might find it hard to push on.

 

[DVEOUS]

I hold FMG, and hope that you might be right.
I do regret not selling a few weeks ago, at the $4.55 peak though.

You must be assuming the current cluster f##k with RIO staffers does not affect anything?
Many companies will be wary of dealing with the Chinese in future.
The Chinese did not do themselves any favors last week, in terms of international business relationships.

Also, the Chinese have stated that they will be using up 100,000 tonnes of the 280,000 tonnes of iron ore stockpiles, driving the price lower.
I read this morning that the June peak we saw will not be revisited until late 2010.

I also read that the Chinese will be establishing a fund for the purpose of investing in "struggling explorers", so they have a direct investment, and can help guarantee supply/prices for themselves.

My thinking is, both RIO and BHP have created such a bad "loss of face" to the Chinese, (which triggered the action against the RIO employees), that FMG would have to be the next obvious door to come knocking on.

I am slightly concerned that market commentary mentions not seeing the June peak until late 2010 again, but I won't panic sell FMG, because I expect FMG should get into bed with the Chinese.
FMG would be fools not to exploit the situation created by RIO/BHP.

 

[nomore4s]

DVEOUS

I know nothing about any of that (it's all chinese to me:) and tbh I don't really give a rats about it. I trade these set ups purely off the charts, if I'm wrong I'm stopped out - simple.

 

[investorpaul]

Anyone else currently in this?

I got in at $3.66 a couple of days ago and since then it has run pretty hard. Current market depth is indicating it will open up again today and it will be interesting what sort of gains it will put in.

However given that the market has run hard for 5 days (and will prob be up today after the DOW was up 104pts), I am tightening up my stop on this one so when it does retreat I dont give too much back.

 

[nomore4s]

Anyone else currently in this?

I got in at $3.66 a couple of days ago and since then it has run pretty hard. Current market depth is indicating it will open up again today and it will be interesting what sort of gains it will put in.

However given that the market has run hard for 5 days (and will prob be up today after the DOW was up 104pts), I am tightening up my stop on this one so when it does retreat I dont give too much back.

Yep I'm also in @ $3.60.

Still pretty bullish based on the patterns in the charts I posted a few posts earlier. The target I have based on those patterns is around $5.50 not sure if it will make it there at this stage. I will be looking to exit half my position at that target price (if not stopped out first) and try to ride the trend higher if it can be sustained.

 

[investorpaul]

Yep I'm also in @ $3.60.

Still pretty bullish based on the patterns in the charts I posted a few posts earlier. The target I have based on those patterns is around $5.50 not sure if it will make it there at this stage. I will be looking to exit half my position at that target price (if not stopped out first) and try to ride the trend higher if it can be sustained.

Out of interest do you operate on a percentage stop? or set price level?

With FMG I struggle with where to place my stop as I believe it will run further and the stop cant be too close incase of gaps.

Currently I have it at 3.98 (which is 7% away) but I feel its prob a bit loose and will move it up to circa 5%