FMG - Fortescue Ltd

BlindSquirrel said:

I'm getting interested here as well:
Near previous ATH which should provide some support, 0.5 and 0.618 fibs line up around here depending on which base you start from.
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Yes it seems to have settled and if there is a drop, I wouldn't expect it to be too far and then could average.

Motley Fool is almost daily sprouting it's latest views on FMG. Todays' oracle quotes the latest analysis of Bell Potter on FMG. It will be interesting to see the results of the last quarter production and sales. We know July was excellent. August featured sharp falls. September was around $120 a tonne.

Also be interested in volumes being shipped.

According to a recent note out of Bell Potter, its analysts have a buy rating and $20.87 price target on the mining giant’s shares.

Based on the current Fortescue share price of $14.56, this implies potential upside of 43% for investors before dividends.

In addition, its analysts are forecasting a $3.33 per share fully franked dividend in FY 2022. This represents a massive 23% yield at current prices, which brings the total potential return to 66%.

What did the broker say?​

The note reveals that Bell Potter has been running a range of iron ore price scenarios and concludes that the sharp pullback by the Fortescue share price looks overdone.

It commented: “Undoubtedly a brutal move that has done serious technical damage to FMG’s share price and sentiment, it should be taken in the context of a business that is making industry leading margins, has an excellent operational track record, costs among the lowest in the industry, is funded for its ongoing capital requirements for replacement and growth and has an exceptionally strong balance sheet.”

“FMG is in a completely different position than in 2015, the last occasion on which we had a major iron ore price correction. While the share price currently looks like a falling knife, we are of the view that it remains a robust and attractive long-term investment and the current market valuation is an opportunity to build exposure,” it added.

Why the Fortescue (ASX:FMG) share price could be dirt cheap

The Fortescue Metals Group Limited (ASX:FMG) share price has fallen heavily in recent months. This brokers thinks it could be dirt cheap...

www.fool.com.au

A small step for FFI, but a step in the right direction, you can't criticise Twiggy for lack of enthusiasm.

Interesting piece in The Oz. Are all FMG shareholders behind the use of FMG's balance sheet to front FFI? Any rumblings?

Andrew Forrest’s green energy promises hit $200bn​

Fortescue Metals Group would need to find about $195bn to make good on all of the promises made so far by chairman Andrew Forrest on his global green energy spree.

Figures compiled by The Australian show the iron ore major’s green energy subsidiary, Fortescue Future Industries, has inked agreements for hydrogen and renewable energy projects in more than 20 countries over the last 18 months.

While cost estimates are available for only about half of those projects, the total likely cost still comes to a hair-raising $US145.5bn ($195bn).

And that figure is likely to be only a small fraction of the cash needed to make good on Fortescue’s objective of producing 15 million tonnes of hydrogen a year by 2030, with the $US8.4bn cost of a recently announced Argentinian project, producing 250,000 tonnes of hydrogen a year, suggesting the final total could balloon past $US500bn.

The amount of capital needed to make good on the projects where estimates exist underlines growing concerns among Fortescue’s major investors and financial analysts about the speed and scale of FFI’s global commitments as well as the projected return on investment.

Fortescue has been keen to note that no final investment decisions have been made on any of the projects in its stable, and chief executive Elizabeth Gaines told The Australian the company had “clearly articulated its capital allocation framework and has guided to FFI expenditure in the range of $US400m to $US600m for FY22”.

FMG has to diversify, all the money around the world is currently chasing green projects to invest in, I guess Twiggy is trying to catch the wave.
One would hope FFI will be selective about which ones, if any they put shareholders money in, it isn't like the Government where the taxpayer just gets hit up for more money when it goes pear shaped.
Maybe Twiggy is trying to become the Elon Musk of H2?

To date the financial committment of FMG is 10% of it's profits as seed and operating capital for FFI. That to date is $1B plus. The direct return to FMG will be in creating operating efficiencies for the iron ore business in shipping, mining and transport costs. Wiping out all their fuel costs would be worth a bit.

The other big value FMG offers is demonstrated engineering expertise. Those skills mean the difference between success and failure in most projects.

The projects being planned will always be joint ventures with Governments, other partners and financiers. Twiggy is determined that his vision will be supported by Governments, financed by sympathetic supporters and created by him and FMG engineers.

And FMG would take the lions share of the profit.

I agree with SP. If I had to see a parallel I would look at Elon Musk and the development of Tesla. For Elon to jump into the world wide car market with a vision of electric cars as something more than a side niche was "courageous". Ten years later Teslas has created a whole new technology around building cars and using batteries and electric motors as the drive. Elon is also driven by both money and concern about CC caused by CO2 emissions.

I’m looking at selling some Feb22 14/19 bull put credit spreads. RR looks good. I hold some shares in my Investment portfolio and am bullish on them.100 DTE some plenty of time to pull out if the World goes to hell in the mean time.
I won’t get the same dividends as this year but I think it’s a worthwhile play.
Any critics would be welcome.
Gunnerguy

basilio said:

To date the financial committment of FMG is 10% of it's profits as seed and operating capital for FFI. That to date is $1B plus. The direct return to FMG will be in creating operating efficiencies for the iron ore business in shipping, mining and transport costs. Wiping out all their fuel costs would be worth a bit.

The other big value FMG offers is demonstrated engineering expertise. Those skills mean the difference between success and failure in most projects.

The projects being planned will always be joint ventures with Governments, other partners and financiers. Twiggy is determined that his vision will be supported by Governments, financed by sympathetic supporters and created by him and FMG engineers.

And FMG would take the lions share of the profit.

I agree with SP. If I had to see a parallel I would look at Elon Musk and the development of Tesla. For Elon to jump into the world wide car market with a vision of electric cars as something more than a side niche was "courageous". Ten years later Teslas has created a whole new technology around building cars and using batteries and electric motors as the drive. Elon is also driven by both money and concern about CC caused by CO2 emissions.

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FMG put out an announcement today outlining their funding framework for FFI.

Thanks for the heads up VC, here it is.

Gunnerguy said:

I’m looking at selling some Feb22 14/19 bull put credit spreads. RR looks good. I hold some shares in my Investment portfolio and am bullish on them.100 DTE some plenty of time to pull out if the World goes to hell in the mean time.
I won’t get the same dividends as this year but I think it’s a worthwhile play.
Any critics would be welcome.
Gunnerguy

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you may have a hard time getting a good fill on the 19 puts. they are way ITM, when i checked the market today the MMs were not even posting spreads for the 17.50s, let alone the 19s.

i don't think doing it this way is particularly good tax optimisation - you are taking in a lot of up front premium (about 4.60 for the 19 puts minus about 0.90 for the bought 14 puts so about 3.70 net) and you're going to get taxed on that this FY, but you do get to lower your CGT liability by putting the stock position onto your books at 19 if it gets assigned.

if you plan on taking delivery and holding for the medium term, the synthetically equivalent call debit spread (buy the 14 calls, sell the 19 calls) seems better for tax purposes. you take an up front debit of about 1.30 (pay 1.40 for the 14 calls, receive 0.10 for the 19 calls) which can be used to offset premium received from other trades like covered calls. if you take delivery it does put the stock onto your books at 14 instead of 19, but you don't pay tax on that until selling those units and if you hold for 12 months that tax is going to be halved anyway.

maybe the former works better for you if you expect your taxable income to be low this FY and higher in subsequent FYs, in which case you might want to take the gain up front instead of putting a bigger CGT liability onto your books. but i generally try to defer the tax hit as long as possible, and the call debit spread is more suited to that.

delta skew does not favour this spread, at a 19 strike you'd be selling cheap gamma to the MMs, for feb expiry IV at 14 is around 40, at 19 it's only 33 or so. at < 10 delta on the 19 calls, i don't think those are worth selling, they are far too cheap (both in $ and IV terms) and you're giving up potential gains if there's a huge blowup to the topside.

if i was looking to make a long gamma bullish bet, i'd probably consider either buying near the money calls straight up, shortening the distance between the strikes so the upper strike is maybe 25-30 delta (which should fetch a better IV and offset a more meaningful chunk of the bought leg) or try to obtain some calls "on the house" by maybe using a super calendar (where you keep rolling the front leg, probably by using the weeklies to grab as much theta as you can, until the combined front leg premiums have completely paid for the back leg, this does need the stock to not move too much in the near term though).

that's just me though, plenty of different ways to go about it, there's no singular correct approach.

FMG now almost halved. I wonder if value collector is still holding?

POP

There's your sign!!!

Even grabbed a few myself

Fmg transforming into more than just an iron ore miner.
Exciting.

It is all happening.

gg

Good news out of china - government to the rescue. Even evergrande has bounced.

"Fortescue rose as 11% to a 6-week high of $15.79 on short covering," The Australian.

Rubbish. There must be more to it.

over9k said:

Good news out of china - government to the rescue. Even evergrande has bounced.

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Xi played chicken with the market Nd the market won? Looks like evergrande got bailed out....
Is this the standard now?

Looking much better for holders now. I was assuming $14 would break. When I look at the daily chart though, it's been basing for almost 2 months.

Daily

Wow, one little high volume bullish bar and the forum goes crazy for FMG. Has the price of iron ore gone up significantly?
@finicky are you declaring another bouncy, bouncy setup? You haven't got Mr. R.N. Elliott behind you this time.

peter2 said:

Wow, one little high volume bullish bar and the forum goes crazy for FMG. Has the price of iron ore gone up significantly?
@finicky are you declaring another bouncy, bouncy setup? You haven't got Mr. R.N. Elliott behind you this time.

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The Iron Ore price doesn’t actually need to go up to justify a significantly higher share price.

Last time Iron Ore Averaged $90 for the year was 2020 financial year, and FMG paid $1.76 in dividends that year, now if that $1.76 was translated into a dividend yield of 5% (which is highish these days on the ASX), that would mean a share price of $35.

But I think what has caused a pop today is several things.

1, Iron Ore is up today
2, Global coverage of FMG’s hydrogen plans might be attracting a new group of investors.
3, value investors sitting on the sidelines probably also jumped in because of FOMO, (I bought another 15,000 FMGSO2 today).