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FMG - Fortescue Ltd

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Thought this was an interesting read from Forrest's perspective on the inquiry, inquiries into other markets, vale and where they stand in the market, combined with their costs and the $4b deal, along with where fortescue stands. Has some interesting points.

http://www.businessspectator.com.au...ces-and-energy/thin-veil-irrational-behaviour

Can anybody shed some light on what Forrest means by this statement....

"Last week was also the start of the mischievous ‘play the man, not the ball’ suggestions that we are high-grading our ore bodies. The statement completely misunderstands the Australian ingenuity in our processing plants that allows us to upgrade the iron ore, meaning part of our success is operating more and more effectively. We mine a lower grade and therefore less overburden is produced and lower costs are achieved"

How do they "upgrade ore"? Do they blend it in some way?
 
stit said:
How do they "upgrade ore"? Do they blend it in some way?
Click to expand...

Yep. Im assuming its the same as coal. Different processing produces different grades. They can even blend them after the process by physically blending with dozers etc dependant on customer requirements.


pinkboy
 
stit said:
How do they "upgrade ore"? Do they blend it in some way?
Click to expand...

Ore is blended in the processing plant to certain specifications, each company has their own blend that they market.

But I think in this case he is talking about upgrading the ore by removing some of the non Iron content.

Eg. If a mine is producing Ore that is 59% Iron Ore, then it is 41% other stuff. If you can some how remove some of the "other stuff" during the processing, you can take your 59% Ore up to 62% or higher, and you will achieve a better sale price or you could target some of the shallower ore that's cheaper to get at but that is lower grade, but then upgrade it.
 

pinkboy said:
Yep. Im assuming its the same as coal. Different processing produces different grades. They can even blend them after the process by physically blending with dozers etc dependant on customer requirements.


pinkboy
Click to expand...

Folks
Ore blending is a common process done by BHPB, Rio and FMG was no exception.
For iron ore companies like Rio Tinto they use the reclaimers and virtually it is mechanical mixing . It is like you use a stirrer to mix two different solids in a jar. Difference is the reclaimer mixes two different ores into one stock pile.
It is not exactly done at processing plant by definition of processing plant (beneficiation and ore treatment plant) but very near vicinity of processing plant.
Contrary in gold plant often the pressure is to process the high grades to look nice and as driven by gold prices.
Trust it has made some sense
 

If they can "upgrade" ore why don't they just churn out 62% graded ore rather than 58% for a discounted rate? Or is one to assume that the 58% that they produce already upgraded?
 
stit said:
If they can "upgrade" ore why don't they just churn out 62% graded ore rather than 58% for a discounted rate? Or is one to assume that the 58% that they produce already upgraded?
Click to expand...
smelters are tuned to a specific mix, and with the time, some de factor "standards" appear.
Consistency is the key word
 
stit said:
If they can "upgrade" ore why don't they just churn out 62% graded ore rather than 58% for a discounted rate? Or is one to assume that the 58% that they produce already upgraded?
Click to expand...

Suppose it all comes down to cost, it may be cheaper to sell for a discount rather than upgrade in some cases.

I mean then could build a concentrating and pelletising plant and like vale uses in Brazil and rio uses in North America to take low quality ore into a high quality pellet, by it all comes down to cost.
 

So, I guess what that means is that as technology and efficiency of iron ore companies processing plants is refined, the grade of the ore in the mine becomes less relevant. The capital outlay of companies on the processing is more important, which is essentially what forrest was saying to a degree.
 
Ive noticed with the fortescue share price on a day to day trading basis, that more often than not there seems to be a big sell off in the last hour of trade between 3 and 4 o'clock. This seems to be the case regardless of whether the stock is having a positive day or a negative day. Does anyone know if there is any rhyme or reason for this?
 

I suspect it has to do with whispers coming out in the afternoon in relation to how the Iron price is trading that day.

I have noticed in afternoons where it has ticked up, later that night it's announced the Iron Ore price surged higher, and in afternoons that show weakness often later it comes out that Iron has traded lower.

This sort of stuff doesn't bother me, I am more interested in the averaged realised margin, and how this will affect the end of year and half year profit reports.

Whether the price of ore ticked up or down on a given day is almost meaningless.
 
stit said:
So, I guess what that means is that as technology and efficiency of iron ore companies processing plants is refined, the grade of the ore in the mine becomes less relevant..
Click to expand...

The technology already exists, Vale and Rio both mine low grade ore in the Americas, and have to concentrate and pelletize it to make a marketable product, Offcourse it means production cost is higher though, because you have to move more earth and you have a whole other process of concentrating and pelletizing which the Pilbara operators don't have to do.

It's much cheaper just to dig up high grade lump and ship it, in some cases though, which I suggest forrest might be talking about there might be simple ways to arrive slight grade increases
 

Watch this video from the 6min 50second mark, It's extremely corny and old fashioned, But Talks about how when the North American Iron ranges ran out of High grade ore in the 1950's they continued mining the other 95% of remaining low grade ore, and used concentrators and pelletisers to upgrade it.


At the 11min 40 second mark it talks about upgrading the ore

It shows there is nothing new to mining low grade ore.

Also note, when the Americans are talking about "High Grade" ore, they are talking about any ore over 51%, So FMG's 59% in comparison is pretty high grade stuff.

 
Last edited by a moderator:
as of Monday, the port stocks of Iron ore have contracted another 1.5%.
 
Value Collector said:
as of Monday, the port stocks of Iron ore have contracted another 1.5%.
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Awesome - once again thank you, I really appreciate your input. I see that the price of ore is dropping again and the drop in port stocks being attributed to rio shipping less because of " bad weather ". I understood that pretty much the only thing that stopped shipments was a cyclone. From what I can see the Ore ports in wa have only been affected by one cyclone this year, and that was Nathan in March and was a long way from rio's ports. Am I missing something to this story or are people just speaking sh@t?
 
stit said:
. From what I can see the Ore ports in wa have only been affected by one cyclone this year, and that was Nathan in March and was a long way from rio's ports. Am I missing something to this story or are people just speaking sh@t?
Click to expand...

Well, the port stocks have been declining pretty steadily for months, So I don't think weather is the cause of the decline in port stocks. I am no expert of what affects port stocks, But I think it is probably a combination of traders reducing the amount of physical they hold, Chinese mine closures and the restocking that's been happening.

A cyclone only slows down shipping temporarily, and won't normally affect prices that much unless supply is already tight.
 
Sorry for a potentially obvious question, but what is the significance of port stocks?
 

Yeah thats what i thought seems to be the obvious answer even to a particular novice like myself. It annoys me the comments that are quoted by analysts - its nearly to the point that the public comments they make are purposefully underhanded.

Let me ask you this about what you think of the strategy of the 3 majors. Lets suggest for a moment that their sole intention is in fact to drown fortescue out of the market. It seems to me that its clearly evident at prices sub $50/tonne that the chinese have every intention of buying not only fortescue but every other viable mining company under duress regardless of what continent it sits on. It seems logical to me that every viable mine they send to the hands of the chinese is a nail in the coffin of their profits because its an extra tonne at lower prices that won't be purchased from them. If the chinese were to buy fortescue it would be an absolute catastrophe for the 3 majors because all of a sudden there is up to 200 million tonnes in circulation not subject to market dynamics anymore. I really don't grasp the strategy. They say its about market share but in fact they're not gaining market share - rather handing all their corporate power to their primary buyer. The strategy makes no sense to me??
 
herzy said:
Sorry for a potentially obvious question, but what is the significance of port stocks?
Click to expand...

Port stocks are is the amount of Iron ore China has stored at the port, it is handy to know what is going on with port stocks so you can interpret the price movements more effectively and get a clue to future demand.

eg. If port stocks are declining each week for months, it means that China is currently consuming more Iron Ore each week than is arriving on ships, So any weakness in price is likely to be temporary, because the price is being held lower because the shortfall in supply is being filled by eating into the stockpiles, eventually the stockpiles will drop to a level where they can not support the deficit and the excess demand will flow through to higher prices.

if it was the opposite, eg prices declining while port stocks also rising, that is a bad sign.

So I guess what I am saying is to get a proper understanding of what's happening you have to look at port stocks as well as price.
 
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