FMG - Fortescue Ltd

[Value Collector]

 

[Value Collector]

There for if FMG has to cut back some productiom or alot due to waning demand from China, its only customer, for its lower grade IO, production costs will rise sharply as they sell less.

China isn't the only customer any more, they have recently sent ore as far as Germany.

 

[notting]

How much of the high grade stuff do they have? that may be all they have!
They seem to be saying the 58% is the high grade IO. Yikes
There was an analyst on Sky today saying they could be making a loss again if there is further discounting to the benchmark and IO dips again. She said it has potential to go to $1

 

[fiftyeight]

"We are the lowest cost IO producer today", really?

After penalties and other charges???

 

[fiftyeight]

Snip from the September 2017 Quarterly Production Report does not seem ideal

 

[fiftyeight]

Annnnnnd just to keep myself honest, well kinda haha

 

[notting]

So the reality is it is currently costing them about 35US to make about 45US at today's prices.

 

[Value Collector]

How much of the high grade stuff do they have? that may be all they have!
They seem to be saying the 58% is the high grade IO. Yikes
There was an analyst on Sky today saying they could be making a loss again if there is further discounting to the benchmark and IO dips again. She said it has potential to go to $1

She doesn't know what she is talking about.

 

[Value Collector]

So the reality is it is currently costing them about 35US to make about 45US at today's prices.

Its actually better than that, but even using your numbers, thats 77 Australian cents per share profit, making a PE of around 6.

 

[fiftyeight]

Its actually better than that, but even using your numbers, thats 77 Australian cents per share profit, making a PE of around 6.

What price US$dmt are FMG making 77 Australian cents per share profit?

Thoughts on Nevs comments "We are the lowest cost IO producer today"?

 

[notting]

So the reality is it is currently costing them about 35US to make about 45US at today's prices.
Those figures include everything, shipping, interest on debt, admin, exploration because miners need to be always doing that stuff as they go so to exclude anything is misleading.

 

[Value Collector]

What price US$dmt are FMG making 77 Australian cents per share profit?

I was simply using Nottings Number, of a $10US / tonne profit margin, $10US x 170million tonnes, divided by the number of shares, converted back to Aussie dollars.

Thoughts on Nevs comments "We are the lowest cost IO producer today"?

When he is talking about being the lowest cost producer, he is saying their operations are producing tonnes cheaper than any other miner, So their Mining equipment, Processing equipment, Trains, port and ships etc are currently the most efficient operation in the world.

The down side is the marketing side of things, their production is medium grade, so they can't charge as much for their Ore.

So yes they are the lowest cost producer, However they have to sell their production at a discount, So don't have they best profit margin at the moment, But there are both Pros and cons to this.

 

[Value Collector]

So the reality is it is currently costing them about 35US to make about 45US at today's prices.

Where are you getting the $35 figure from? I have it at $30.

Those figures include everything, shipping, interest on debt, admin, exploration because miners need to be always doing that stuff as they go so to exclude anything is misleading.

The figures aren't misleading, you have to understand both figures, you want to know the cost to produce each tonne, and then you also want to know the break even point on each tonne. FMG have always presented both figures.

 

[Value Collector]

I am probably more confident in FMG than I have ever been, very happy with the company at the moment.

 

[fiftyeight]

I was simply using Nottings Number, of a $10US / tonne profit margin, $10US x 170million tonnes, divided by the number of shares, converted back to Aussie dollars.

How are you calculating $10US / tonne profit margin? Or is that what FMG made last year?

 

[Value Collector]

How are you calculating $10US / tonne profit margin? Or is that what FMG made last year?

My response was to nottings post, using his numbers, he quoted a $10 profit margin.

But I actually think they are making $15US per tonne at the moment, I think I went over my calculation of that in the PM with you a while back.

 

[notting]

I was guesstimating the figures expecting to be corrected if they were way off.
So we should be watching the IO price for if it falls to 47 then FMG will not be profitable they also indicated that they may have to discount their product further this coming year.

 

[fiftyeight]

Yeah I have had read through the PM.

Maybe what I am getting at is what notting has asked. All in inclusive of fines what price do you calculate FMG to break even at?

 

[notting]

2 very good days for IO however FMG seems to be running into strong selling as it gets close to the $5 and finishing with only marginal gains.

 

[notting]

I suspect they will be cutting their dividend tomorrow,given the one off costs and lower prices per WMT and higher AU$ relative to spot prices.
May disappoint quite a few optimists hoping for a yield feed on a rough day.