FMG - Fortescue Ltd

[Tysonboss1]

Anything is possible, but why not just buy AGO which has not debt and produces cheaper and has been just as badly, actually more badly spanked. No BRAINER. :screwyr RIO.

I am not an expert on AGO but I do prefer FMGs infrastructure position, and I think FMG is better value than RIO.

also my exposure to FMG so far has been through selling deep out of the money puts, AGO doesn't have an options market

 

[Tysonboss1]

Anything is possible, but why not just buy AGO which has not debt and produces cheaper and has been just as badly, actually more badly spanked. No BRAINER. :screwyr RIO.

I have had a closer look and I definately prefer FMG over AGO.

The scale of FMG's mining operations and developments puts it infront of AGO in my opinion, Not to mention the infrastructure FMG owns, which puts it in great shape to easily expand and/or take on JV partners like BC iron by offering access to it's rail and port.

Yes FMG has more debt, But this is becaue it has built and owns the infrastructure. And the type of and structure of the debt it low cost and stable so I am comfortable with it.

FMG is also better Value than AGO at the moment when you look at what your getting for your $$$.

 

[notting]

Developed economies have spent 40+ years consuming more than 500kg of
steel per person

This is a shockingly misleading statement from their presentation.
If the management of FMG really believe that the Chinese are going to do that with the current level of population they should all be removed.
They are either utterly naive or deceptive.

 

[Muschu]

i don't hold this stock but I see it went up 10% on Friday following a production report. Other big miners also went up of course but not to this extent.
I've viewed FMG as very risky and have stayed away (in fact the only resource stock I hold is MIN).
FMG seems to work from a "promise" base and I understand also carries significant debt.
However I am now beginning to wonder whether it offers value at a price below $4.
Any thoughts from people who follow this company more closely? (I know the iron ore price is a major variable).
Regards
Rick

 

[dat111]

i don't hold this stock but I see it went up 10% on Friday following a production report. Other big miners also went up of course but not to this extent.
I've viewed FMG as very risky and have stayed away (in fact the only resource stock I hold is MIN).
FMG seems to work from a "promise" base and I understand also carries significant debt.
However I am now beginning to wonder whether it offers value at a price below $4.
Any thoughts from people who follow this company more closely? (I know the iron ore price is a major variable).
Regards
Rick

Do you believe the world will increase or decrease the need for Iron Ore? If your belief is the world will increase the need for Iron Ore, this is a buy and hold type stock. The infrastructure that FMG is putting in place will create a mechanism to supply Iron Ore for many years to come. Start-ups for new mining companies of this magnitude do not happen all of the time. Since my belief is that the need for Iron Ore is going to grow greatly, I am hoping that FMG will be bought by BHP, Rio Tinto, or Vale as they have greater lease holding than any of these companies.

 

[Muschu]

Do you believe the world will increase or decrease the need for Iron Ore? If your belief is the world will increase the need for Iron Ore, this is a buy and hold type stock. The infrastructure that FMG is putting in place will create a mechanism to supply Iron Ore for many years to come. Start-ups for new mining companies of this magnitude do not happen all of the time. Since my belief is that the need for Iron Ore is going to grow greatly, I am hoping that FMG will be bought by BHP, Rio Tinto, or Vale as they have greater lease holding than any of these companies.

Appreciated dat111 and thank you. I consider my beliefs about iron ore futures to be a poor base for making assessment decisions. There is too much I don't know. Will significant iron ore resources be found on other continents and mined more cheaply? Will there be an under supply or over supply of product....

I don't particularly want to buy FMG at $3.80 and watch it go to $3 l wait for it to go to $5.... I don't want to rely either on a hope that FMG will become a buy target.

AGO bought Aurox. The price surged and has now plummeted. Yet AGO is producing and selling.

I agree FMG has attractions. I am trying to weigh up the risk.

 

[tinhat]

I've just been reading through Fortestcue's most recent quarterly update. They are forecasting that once at 155mta production their all in cash cost of production will be $40US wmt (per wet metric tonne).

They report their costs per wet metric tonne but they report their revenue per dry metric tonne. Do Fortescue sell their iron ore as a "wet" product and will this be the case when they have finished expanding and are blending all their production? If so, what is the price discount for their wet iron ore versus the dry price they quote and what is it likely to be the same once they are at full production? I'm confused by this.

Also, has anyone seen any figures as to what their total costs are forecast to be once they have reached expansion?

Basically I would like to be able to grab a forecast of earnings for FMGs total planned output of 155mta.

 

[tinhat]

I've answered one of my questions from above, looking at the last half year results report.

The report quotes the price achieved for the half year as:
62% CFR Platts Index price of US$118 per dry metric tonne

Looking at their sales revenue and tonnes shipped figures for the half year, they achieved revenue of approx $94 per tonne shipped, so we can conclude that the price achieved for ore shipped is approximately 80% of the 62% CFR Platts Index price they quoted.

Looking at their most recent presentation they reckon I'm concluding that they reckon they can get their total operating costs down to US$60 per dry metric tonne.

I'm going to do some number crunching. At a guess I don't think that FMG is as compelling an iron ore play as RIO but I don't think that the pessimism around FMG being a going concern in the long run is warranted either. If they keep their landed costs lower than Vale then they win.

Of course the debt gearing will always be a deterrent. It is currently at around $12.5 billion? What is it likely to be by the time they are at full production?

I'm thinking out loud here - a correction of the gold price -> correction of AUD -> realignment of AUD and terms of trade -> opportunity to go long iron ore?

 

[sptrawler]

If FMG sells off its rail network to a third party, this would give easier access to companies like Atlas.
It will be interesting to see how much they reduce their debt, if the sale goes ahead.

 

[piggybank]

On a roll since late June (when it was just around the $3 mark). Closed today at $5.84.

 

[dat111]

On a roll since late June (when it was just around the $3 mark). Closed today at $5.84.

I love to see a growth company attack debt before it is due especially when the interest rate is high. FMG announced that they are paying off half of the debt that is due in 2015. By paying down debt early, offering a dividend, having a competitive P/E ratio, having a low cost model for iron ore production, etc bodes well for a long term viable company.

 

[ROE]

I love to see a growth company attack debt before it is due especially when the interest rate is high. FMG announced that they are paying off half of the debt that is due in 2015. By paying down debt early, offering a dividend, having a competitive P/E ratio, having a low cost model for iron ore production, etc bodes well for a long term viable company.

They attack because they have to ...they close to die when iron ore price collapse last year, after that management wake up and said we have to do something before the next collapse in price...

Andrew stepped in sack a whole lot of senior management and cut cost and go about paying down debt...

Has iron ore price keep heading south they are in deed in trouble....

Never the less it was a good thing for fmg holder ...you see lot more conservative going forward

 

[Country Lad]

...you see lot more conservative going forward

This has been the key to the recent re-rating of the company. Many brokers and analysts have been unnecessarily critical of FMG and Forrest from the start and some still are without justification.

Now that the mine and infrastructure development is mostly over, and the company is becoming simply a digger and exporter, it has settled down to managing the reduced number of risk, being mainly debt, costs and fluctuating iron ore price. The more boring company it becomes, the more the market will take to it.

Cheers
Country Lad

 

[piggybank]

Sad to see yet another accident resulting in a death - do they have a OH&S induction course policy at their plants? If so, it sadly seems that it either not effective enough or the workers aren't adhering to the law.

A young worker has died, and another man been injured, in an industrial accident at Fortescue's Christmas Creek mine. It is the second time in four months that a worker has been killed in incidents at the mine, owned by Andrew Forrest's Fortescue Metals Group. Fortescue says the 23-year-old contractor was fatally injured while working in the mine's heavy vehicle workshop overnight. The company says the man and a workmate were doing maintenance on a surface miner when the incident occurred - the other man suffered leg injuries. Fortescue's statement gives no further details of the incident, but it says the police and the Department of Mines and Petroleum have been informed and will assist with investigations.The dead man's name has not been released yet by police, but Fortescue says it is making chaplaincy and other counselling services available to affected workmates and to the deceased worker's family and friends. In a statement, Fortescue's chief executive officer Nev Power says he is deeply saddened by the news. "Our thoughts and prayers are with the family and loved ones confronting the loss of a young life full of promise" he said. The death is the second to occur at the mine this year, with New Zealand electrician Kurt Williams crushed to death in August. Another worker had his leg amputated after a truck accident at the same mine in October this year.

 

[CanOz]

Managing safety in the workplace is more than just induction. Its a complete strategy focused on eliminating risks.

If you cannot manage safety, you have no business managing.

 

[Value Collector]

This is one of my favourite companies at the moment. Based on my analysis it is grossly undervalued. It is being undervalued I think because of a fear the price of iron ore may collapse, however if FMG are able to keep their costs down and clear a $20 / tonne profit, I can see them being worth a lot more than they are trading at now, and they are currently making a lot more than $20 per tonne.

The Kings deposit mine is due to begin ramp up this quarter and with the production from the firetail mine this years profit should be a decent one. But I expect a major rerating leading up to the reporting of the first full years production from all four mines being reported in July 2015, between now and then or perhaps shortly after we should see FMG over $10 / share perhaps even as high as $15.00.


I hold FMG.

 

[Valued]

I have been looking at this too. Looks like we are coming up on a previous support area. I am waiting to see what happens. I could short or long this one yet depending what I see in the next week.

FGE was a company that looked undervalued too and they didn't even kill anyone and still was a huge loser.

 

[Value Collector]

I have been looking at this too. Looks like we are coming up on a previous support area. I am waiting to see what happens. I could short or long this one yet depending what I see in the next week.

FGE was a company that looked undervalued too and they didn't even kill anyone and still was a huge loser.

FGE is a completely different style of business with different economics. Mining infrastructure companies make their money in the construction boom, Mining companies make their money after the construction boom as they mine the deposit. FMG's capex is done, its now just a story of mining the deposits and clearing debt and paying dividends to shareholders.

To put the matter of the work place deaths in perspective, BHP's worst year of work place fatalities was 16 deaths in one year. Offcourse the death is a terrible occurrence and I hope the contracting company running FMGs work shop learn the lessons needed.

 

[HCC]

basic observation = SMA 50 still trending above SMA 200, hope that helps a lil bit. crossed back in sept, med term holding might worth it, having said that im definitely in for 6 months holding once the SP finds support.

 

[Value Collector]

The debt reduction at Fortescue continues, they have announced today that

"Fortescue Purchases Christmas Creek Ore Processing Plants"

"The buy-out of the finance lease for the OPFs continues Fortescue’s ongoing debt reduction program."

I expect we will see more of this kind of thing as they aim to knock out their most expensive debts, The free cash flow being produced at the moment is going to mean they will be reducing their debt loads quite rapidly.

this debt buy out should also have a positive effect of the cost of production, because they will no longer have the contracting company that ran the asset as a middle man, as they have taken over the running of the OPF them selves.