FMG - Fortescue Ltd

[Value Collector]

i agree that there are ways to work around it, but they'll likely be more inconvenient than if the lot sizes were all 100 to begin with. one might not want to roll all the way out to dec (i normally prefer to roll out a month, two tops, as i like the faster decay of the shorter dated stuff - not saying that's the best way to do it, it's just my own preference) so copping the lot size differential may be unavoidable.

rolling as two separate legs runs the risk of slippage. may or may not turn out to be a big deal in the end, but ideally one shouldn't have to be concerned about slippage when rolling.

in theory you could punch in a combo order with some wacky ratio to try and avoid the slippage, eg. if you have 50 of the 100 lot size contracts and you want to roll to 46 of the 107 lot size contracts (covering 4,922 units of underlying) you could try punching in a combo with a 25:23 ratio. i don't know the inner mechanics of combo orders as well as @cutz does though, so i'm not sure if such a combo would actually get filled - i've only ever booked combos with "standard'ish" ratios eg. 1:2, 2:3, 1:3.

BHP has something similar, it has the odd option chain with 104 lot sizes. these days i just avoid those chains, even if it means i don't get the quicker decay by having to sell longer dated contracts that do have the 100 lot size, i just find it more convenient in practice to run positions off a consistent 100 lot size. YMMV.

Yep, all true.

 

[basilio]

It does make you wonder that if I could work out these basic figures using a simple calculator, the annual reports and a basic understanding of the business, why couldn’t these analysts figure it out?

It does indeed ? It's not rocket science but very basic investment analysis.

In fact this example really does bring into question the capacity, and perhaps integrity, of many analysts. FMG is not a two bit outfit but a top tier high value company. If one is supposedly analysing the market to advise clients on potential quality options then, IMV, the failure to do the simple processes VC highlights and advise accordingly seems unforgivable.

 

[Sean K]

Anyone believe Treasury's forecast of IO dropping to $55 a tn by Mar 22?

Last time IO was around that price FMG was about $4.

Treasury don't have a great track record with these forecasts I guess.

 

[qldfrog]

Anyone believe Treasury's forecast of IO dropping to $55 a tn by Mar 22?

Last time IO was around that price FMG was about $4.

Treasury don't have a great track record with these forecasts I guess.

China has just blocked LNG from Australia, once they feel they have enough stock, IO will be next.that could explain the forecast

 

[Beaches]

Anyone believe Treasury's forecast of IO dropping to $55 a tn by Mar 22?

Last time IO was around that price FMG was about $4.

Treasury don't have a great track record with these forecasts I guess.

If Treasury are calling a price of $55 by next year .. the price is likely to be anything else. They will more than likely get the year wrong and the price wrong
Treasury has consistently been the worst forecasters of the IO price.

 

[sptrawler]

China has just blocked LNG from Australia, once they feel they have enough stock, IO will be next.that could explain the forecast

China plays the long game, that is how they have achieved so much in 20 years, they will be working on the IO problem of that I'm certain.

 

[qldfrog]

If Treasury are calling a price of $55 by next year .. the price is likely to be anything else. They will more than likely get the year wrong and the price wrong
Treasury has consistently been the worst forecasters of the IO price.

True could be $25 in 6 months

 

[Value Collector]

Treasury don't have a great track record with these forecasts I guess.

If you had the skills to predict the Iron Ore price like that, you wouldn’t be working at the treasury.

 

[Value Collector]

If Treasury are calling a price of $55 by next year .. the price is likely to be anything else. They will more than likely get the year wrong and the price wrong
Treasury has consistently been the worst forecasters of the IO price.

Imagine if I told you that you had to guess what the Iron Ore price was going to be in 12 months, but if it ended up being higher than your prediction you got a pat on the back ,while if it’s lower you get get publicly humiliated and possibly fired.

What price would you write in the box? Haha, I bet you would low ball your answer rather than try and nail it.

 

[joeno]

If Treasury are calling a price of $55 by next year .. the price is likely to be anything else. They will more than likely get the year wrong and the price wrong
Treasury has consistently been the worst forecasters of the IO price.

"In November 1997 the then Treasurer, Peter Costello, shocked some people when he announced he'd signed off on the sale of $2 billion worth of Australian bullion. On the day he announced the sale the price was around $US306.00 an ounce. At the time, according to Mr Costello, gold "no longer plays a significant role in the international financial system"."

Smart bunch.

Worth its weight in gold

It wasn't that long ago gold was on the nose, especially in Australia, but now, everyone wants it.

www.abc.net.au

 

[over9k]

Tony Blair did the same thing. Insanity.

Basilio - the only curveball I'd add is exposure to political risk. You can see the way china's decimated several other products (crayfish, coal et al) but AU obviously has far more leverage when it comes to iron ore (china needs it far more than they need crayfish) so the risk isn't nearly as bad as it is for the crayfish farmers etc.

It does, nonetheless, remain though.

 

[over9k]

China unveils 5 year plan to wean itself off australian iron ore, big miners plummet (and xjo/xao to some extent) as a result.

 

[Beaches]

Champion Iron has just lodged its 3 month and 12 month accounts

Record EBITDA1 of $275.8M for the three-month period ended March 31, 2021, compared to $60.7M for the same period in 2020. Record EBITDA1 of $819.5M for the year ended March 31, 2021, compared to $347.4M for the same period in 2020;​

Probably a good insight into the sort of numbers to be expected from FMG for the year

 

[Value Collector]

FMG released a presentation from the ASA conference today, there is some very interesting slides there, well worth a look for any one interested in FMG or the Steel industry.

 

[basilio]

Champion Iron has just lodged its 3 month and 12 month accounts

Record EBITDA1 of $275.8M for the three-month period ended March 31, 2021, compared to $60.7M for the same period in 2020. Record EBITDA1 of $819.5M for the year ended March 31, 2021, compared to $347.4M for the same period in 2020;​

Probably a good insight into the sort of numbers to be expected from FMG for the year

Agree. We saw what sort of result FMG showed from July-Dec 2020. Quite amazing. But ore prices have continued to escalate in the last 6 months. Costs per ton would be the same so it's all profit after tax is paid.

Would not be surprised to see a $2.50 per share dividend for the last 6 months.

 

[Value Collector]

The facts presented in this video explain a lot of the reason why we have seen such high steel demand and hence High Iron ore Ore prices since the pandemic took hold.

One of the facts that surprised me is that out of every 100 shipping containers that leaves china bound for the USA only 40 end up returning to china, thats a lot of steel being drained out of china that needs to be replaced with Iron Ore.

Add to that the fact that demand for physical products has risen dramatically as people buy products and do home renovations rather than holiday, and alot of those products contain steel.

Not to mention that as the latest ASA presentation from FMG shows, steel prices inside the USA have risen dramatically much faster than they have in china, so I would think alot of steel is being shipped to the USA to be used in USA based manufacturing, especially with all that pent up demand for vehicles which is being unleashed as the economies awaken.

While I do believe that Iron prices will end up dropping back under $100 (which is fine by me because even $80 - $90 Iron is super profitable for FMG), I think we may see steel demand and Iron Ore prices remain strong for quite some time, if not above $200, at least well above $100 maybe for most of the next financial year.

 

[basilio]

The CCP and some other commentators have been pushing the line that China won't stand for the current iron ore price gouging and will create new suppliers and develop internal rules to force a lowering of prices.

This article suggest that won't happen quickly or easily. Main points

• The sheer amount of ore required means quite huge mining and infrastructure development - which can't happen quickly
• The sovereign risk factor in African countries is high. No point developing a mine if the country won't pay it's debts
• The current Australian ore suppliers are exceptionally cost efficient. They can stand lower prices far longer than any up and coming development

In any case Australian miners are rapidly moving to green steel production and diversifying their exports. And with billions of windfall dollars at hand this will happen fairly quickly.

From an FMG perspective I think they have a bright future.

China’s ‘frustrating reality’ cruelly exposed

In its race to become the most powerful nation on earth, China has flexed its muscles over the past few weeks with moves that have sent shivers down the backbone of Australia’s economy.

www.news.com.au

 

[Value Collector]

The CCP and some other commentators have been pushing the line that China won't stand for the current iron ore price gouging and will create new suppliers and develop internal rules to force a lowering of prices.

This article suggest that won't happen quickly or easily. Main points

• The sheer amount of ore required means quite huge mining and infrastructure development - which can't happen quickly
• The sovereign risk factor in African countries is high. No point developing a mine if the country won't pay it's debts
• The current Australian ore suppliers are exceptionally cost efficient. They can stand lower prices far longer than any up and coming development

In any case Australian miners are rapidly moving to green steel production and diversifying their exports. And with billions of windfall dollars at hand this will happen fairly quickly.

From an FMG perspective I think they have a bright future.

China’s ‘frustrating reality’ cruelly exposed

In its race to become the most powerful nation on earth, China has flexed its muscles over the past few weeks with moves that have sent shivers down the backbone of Australia’s economy.

www.news.com.au

Also, the best incentive to increase supply is higher prices, so over time higher prices naturally increase supply.

So if you are frustrated by higher prices, the best thing to do is just accept it and wait for the market to correct naturally, if you Bark about artificially restricting prices, all you are going to do is scare off people from investing to increase supply, which will have the opposite effect, and cause prices to stay higher for longer.

 

[Sean K]

Shouldn't Twiggy just stick to digging up iron?

Is he going/gone woke?

How much of FMG's profits are going into changing the weather?

 

[bk1]

Or is it because the deposits in Congo can be mined on a smaller scale with hydro electric power?
Only 14% of the population as of 2017 could count on regular electricity supply, most of it goes to large scale mining operations, who rebuilt the existing infrastructure after years of war and neglect.
I'm assuming this is all about copper....