FMG - Fortescue Ltd
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2007 was still the 12 month bench mark system that's why the price chart is flat for 12 month periods, the mills had the miners locked into 12 month contracts, the spot price was much higher.
during that time the mills with the contracts were often selling the ore to other mills without contracts for much higher prices. that's why bhp pushed to end the bench mark pricing model because they were missing out on the fat margins being earned by resellers in the spot market.
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I am not an expert in shipping, but it does seem weird that it would cost less than 50% more to ship product 3 times further.
any way, what's more important is the Margin FMG can make. at the moment, that's looking good.
Non-cash impairments.
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Yes, you're correct. My point was that there was a huge spike in demand in 2008, from what could be called a non-rational buyer (China). It has taken years for the supply response to happen, but it seems to be playing out. When does Africa come online? Similarly, how long could you build empty cities?
Vales ebit for the last quarter was 500m. If a comparative small fry like fmg can eek out a 330m net profit I think it's a fair assumption at current prices they're struggling with cogs. Their next report will be interesting. If it's not in the black by then I think their goal of 400m tonnes may well be very optimistic
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FMG's presentation today had a few interesting charts, two cost curve charts one from the prior period had FMG sitting ever so slightly above Vale, however the forward looking chart put together by JP Morgan has FMG sitting below Vale on the cost curve.
there is also an interesting chart showing how FMG's costs have declined massively as they have been well and truly been narrowing the spread between themselves and Rio/BHP. Fmgs cost have dropped more than 50% since the 1st half of 2013, offsetting a large part of the declines in commodity price.
Also in a side note the Iron ore price seems to be continuing is upward trend, so margins are looking pretty good at the moment, things are looking pretty good to me.
there is also an interesting chart showing how FMG's costs have declined massively as they have been well and truly been narrowing the spread between themselves and Rio/BHP. Fmgs cost have dropped more than 50% since the 1st half of 2013, offsetting a large part of the declines in commodity price.
Also in a side note the Iron ore price seems to be continuing is upward trend, so margins are looking pretty good at the moment, things are looking pretty good to me.
Is that on the net? Is there a link? Would love to have a look.
I keep thinking old mate from seeking alpha may be on the money re his forecast. Yes it's obvious that demand may be peaking, but the current demand isnt going to disappear overnight. The current demand from china ( 70% of seaborne trade only ) is more than the increase forecast production of the big 4. I tend to think the worst is over as other players above 60 per tonne inevitably leave the market. Maybe this has already happened and left a deficit forcing up the price. The doomsdayers with the sky falling attitude just don't seem to make that adjustment and only focus on a glut based on current total global production, even though inventory stockpiles don't back up what they're saying. Could be very wrong but hope I'm right!!
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The Chinese are not stocking up like they used to.
The positivism is based on IO v US$ which is negated by the rise in AU$.
Perhaps the positivists are overlooking that!!!
I'm in no mans land at the moment taking a breather from FMG looking to get back in on the short side whilst remembering FMG needs an IO price of around 80 to repay debt over the longer term but only if it has to.
Getting through 2.80 on a long would be a start whilst remembering it does Vs not Us.
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The presentation is on CommSec and the asx website under FMG's asx announcements, I tried to link it a few times but my iPad keeps refreshing the page every time I try.
ok thanks for that will try and dig it up
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Here it is, hopefully the link works now that I am on my computer.
http://www.asx.com.au/asxpdf/20150507/pdf/42ydz9c18cm2qs.pdf
awesome - thanks for that, an interesting read
........so a month after the price began to rally and all we can get for an explanation is mills are restocking and will be short lived. I can only imagine how it plays out in china.......Billo wakes up one morning in April and rings Stevo.....vling vling, vling vling......Stevo "harrow?"...Billo " horry tit Stevo i bin down at da beach dinking bing tang watching poo tang and i outta stock!!!!!" Billo....."holy tit me too!!!! I ring Teddy and tell him we go to markets.......vling vling, vling vling...Billo " me and stevo outta stock...... we go to markets.......you come too".........and so like the three little piggies they all got on their bikes, went to market, filled their bike baskets with ore and lived happily ever after. I feel so blessed that highly educated "analysts" can write a children's novel. Given the steel market in china is in such dire straights.......what are the mills restocking for? Why don't they just continue to operate on next to no inventory just like they have been doing and keep prices low and falling? If we're to believe what we've been fed for the past 12 months and that the market is so heavily oversupplied, why has Billo, Stevo and Ted all woken up in April and started to bid against each other?? Surely a halfwit could see its counter productive to all restock ( restock for a non event that is ) at the same time and force up the price of an over supplied commodity??? That must be too much foresight for Billo, Stevo and Teddy to come to terms with. I guess i must also have to believe that Stevo, Billo, and Teddy (in their wisdom) all going to market together, has more of an impact on price than the millions of tonnes exiting the market over the last 18 months with no impact on price....... Clearly Stevo, Billo and Teddy buy a sh*t load of ore in one foul swoop to force the price up by $15/tonne.
Clearly nobody has a clue.................
Clearly nobody has a clue.................
Knobby22
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Rumours in the Fairfax press that South 32 and FMG might merge.
That would solve a lot of problems (reduce debt risk for FMG, improve cash flow for South 32)but I don't think BHP would like it, it would be effectively a second BHP producing iron ore.
That would solve a lot of problems (reduce debt risk for FMG, improve cash flow for South 32)but I don't think BHP would like it, it would be effectively a second BHP producing iron ore.
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South 32 shareholders would be getting the better deal, FMG's assets are better and are totally undervalued at the moment, I can't see Twiggy wanting to support the deal unless the terms fully recognised FMG's value, but then south 32 wouldn't want to do it.
I am a shareholder in both enterprises, but I have a lot more FMG than BHP/south32, I kinda like having FMG as a pure play, I would rather see them just continue clearing debt, and wait to cash flow acquisitions in the future.
" FMG's assets are better and are totally undervalued at the moment"
Ok so fmg should be making approx $20 per tonne at the moment. Let's assume prices have established a floor at $46 and fmg generates roughly $10 per tonne as a minimum going forward. Obviously to garner share price support the market needs to be convinced that floor has been reached. In your opinion how long do you think this will take to unfold? 6 months? 12? I think you've said once before that you'd be looking for a share price around $5 with a $10 margin
Ok so fmg should be making approx $20 per tonne at the moment. Let's assume prices have established a floor at $46 and fmg generates roughly $10 per tonne as a minimum going forward. Obviously to garner share price support the market needs to be convinced that floor has been reached. In your opinion how long do you think this will take to unfold? 6 months? 12? I think you've said once before that you'd be looking for a share price around $5 with a $10 margin
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$10 clear operating profit / tonne should mean they could be worth $7.50 / share. It can take the market a while to reflect this though.
I am prepared to wait 3 years, But don't think it will take that long.
it will probably happen progressively, as the market gets over the shock of the Iron ore price falls and becomes comfortable with FMG's profit margin and earning power. As certain milestones are hit eg, half and full year profit results that reflect the new lower production cost we should see surges in share price, or if there is a significant rise in the iron ore price to the point that it is obvious to everyone that FMG are making a great margin and they resume clearing debt the price should surge.
I think over $6 could be easily achieved by the end of the year, and my 2-3 year price target is over $10, potentially $15 is the next 2-3 years prove to be a margin of close to $20 and are able to clear a bunch of debt and pay some healthy dividends.
So you don't share the common perception that ore is going to crash again at the end of the year assuming a price of $6?
What price did you buy into go long at?
You been doing this long?
