FMG - Fortescue Ltd

prawn_86 said:

Man this thread goes quite when the price is stagnating

As i have said before, if it gets to about $6.50 it is what I would call fair value and i would consider buying in after some more research regarding the points raised above about ore quality

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maybe its been quite-its always the case when things are not going north-

but i will be the first to say i am not happy-who is-but this aint the first or last stock to act like this-

on the other note-i am also happy to see it at these levels as i have been stocking up

i do not trade like this on every stock-only on the ones that i find and feel are cheap and will shine in years to come-

i dont know what happened today but the $6.50-6.90 would be good to see as i see it a better bargin-

Only time will tell-

Thanks

Nick--

prawn_86 said:

Man this thread goes quite when the price is stagnating

As i have said before, if it gets to about $6.50 it is what I would call fair value and i would consider buying in after some more research regarding the points raised above about ore quality

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isnt this classed as ramping down....?
so you hope they drop to $6.50 what you call value and then you hope they go up to what over valued

so what is your price then?

actually i'm more interested in how you derived that figure. thats a market cap of $18.5b and a long term debt of 2.9b (commsec figure not fmg's figure) and a EBITDA of 3.4b and a realistic plan to double and an potential to double again.

i meant exit price, but as i didn't make the edit until after 20mins, this becomes a new comment.

part of the interest in fmg is that is has such divergent valuations by people who are professional.

Guys in bull markets you can price a stock any way you want but in bear markets company's are priced on risk.

Below is the chart, this is reality, the bias currently is to the down side.


I understand you are holders and its not fun right now.......
.

IFocus said:

Guys in bull markets you can price a stock any way you want but in bear markets company's are priced on risk.

Below is the chart, this is reality, the bias currently is to the down side.


I understand you are holders and its not fun right now.......
.

Click to expand...

Good grah IFocus

Would you be able to provide similar graphs with your comments on BHP, MRE and likes

Great service and thanks

My apologies all, in my last post i should have linked back to why i believe $6.50 to be fair value, so here are the quotes:

prawn_86 said:

I agree Reece.

On a fundamental, on paper, basis anything over about $6.50 seems overpriced. Hence why is said a while back when it dropped, it may represent an opportunity.

Im not saying this wont go up on hype, greed, sentiment etc etc, but those buying NOW for fundamentals are pushing their luck imo

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prawn_86 said:

Although it has come off a bit from its $8 ($80)+ its still trading at a forward (2009) PE of approx 33, which seems a bit high still for me. And a 2010 forwards PE of 14

For a company that is this big, and has a lot of salience would suggest 25 - 30 forward (1yr) PE would probably be appropriate.

So for me i would suggest around about $6 - $6.50 is fair value for FMG, given the current environment, demand etc etc

But once again i state the fact that there are co's already producing on PEs of 1 or 2, and they wont have any comminsioning or uprgrading problems, such as FMG may face to achieve full production...

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I was reading one valuation that said just a $10 price rise for iron ore, either lump or fines, would result in them increasing their valuation by $5/share. If you use the same logic and say just a $10 price drop would result in a much lower s/p you can see easily how so many can arrive at such disparate valuations. Must add they see it valued at $11/share atm.

Many assumptions used for valuation need de-risking.

The valuation I read today (on talking point) assumes all resources will be mined. The problem here most ore is still inferred status or unexplored that will be heavily discounted during bearish time. Better than making valuations on rock chip samples but still not ideal. More drilling/exploration required. Believe they are doing some at solomon Will help de-risk.

It assumes a mythical, at this stage, ramp up timetable. This would need to be confirmed by FMG. They suggest FMG may set a more ambitious timetable. Once known this assumption will be de-risked.

It assumes long term average exchange rate .78. I guess one would take all forecasts and average out updating regulary.

Cash costs will go higher before they go lower. Economies of scale on for eg 200mt per annum will be far lower than costs for the ramp up stage. Now read the report and see projected bottom for iron prices. The difference in margins if they at at full capacity when prices hit bottom will be staggering compared to if they are still at ramp up stage.

I have read iron ore prices expected to bottom 2011 and 2012. I have read they should bottom out at prices differing by up to USD $25/t.??

Capital required for expansion. 5bn quoted, also by Paterson according to press. How do they raise it, over how many installments, will FMG surprise by coming in with much lower capex requirements?

Now my opinion

In bearish conditions for FMG to reach this target $11.00 there needs to be more definition and metallurgical study of resource.

Actual capex plans and production ramp up timetable released by FMG.

More consensus between analysts on iron ore prices and foreign exchange rates going forward.

So earlier poster who said all about risk is on the money. What may probably may happen is probably not good enough for the market atm. De-risking of some assumptions will be required. I would personally add a premium to lowest valuations purely because I think they may well pull it off.


http://www.fostock.com.au/talkingpoint/FMG080801.pdf

i agree with risk evaluation being the key to differing valuations for fmg. and future risk both known and unknown are dastardly difficult to value.

how do you get a PE of 33?

prawn_86 said:

My apologies all, in my last post i should have linked back to why i believe $6.50 to be fair value, so here are the quotes:

Click to expand...

and they wont have any comminsioning or uprgrading problems, such as FMG may face to achieve full production...

twiggy got the project running up in 2 years

how long did it take BHP and RIO?

do you think he is going to fail to reach full production?

i don't think so.. he has the chinese, WA economy, local indigenous, local iron ore juniors behind him...

the infrastructure is world class too - didn't you not hear about the dumper?

obviously not.. i am amazed by some people's comments especially when they do not hold the stock - they must be good Samaritans, telling us for our best interest

agro

Never used to listen to non-holders of stocks i held myself. Biggest mistake I ever made.

Personally looking for point of reference for all iron ore miners or explorers. FMG is biggest pure iron ore play so stands to reason it will be pulled apart.

So many variables, so many what ifs...so will get so many price targets.

FMG have done insanely well but still cyclical implications need to be considered.

do a valuation of bhps iron ore value, or rio, its not that hard for bhp....
maybe compare with vale

they are the same cost of production league as fmg,

everyone else is - not

I love day trading with FMG in present market conditions.

Ive got on board - if you cant beat the day traders then I say join em!

Trial date set for FMG, ASIC showdown
28-August-08 by Staff Reporters

Fortescue Metals Group Ltd and its chief executive Andrew Forrest will head to court in April next year to fight claims made by the corporate watchdog.

ABC radio reported the Australian Securities and Investments Commission claim FMG and Mr Forrest had allegedly mislead investors by claiming it had a binding contract to build and finance a railway, port and mine before its Pilbara operations were built in 2004.

If ASIC wins the case, it is calling for Mr Forrest to be disqualified from running a company and to pay for FMG's fines of more than $3 million.

http://www.wabusinessnews.com.au/en-story/1/66004/Trial-date-set-for-FMG-ASIC-showdown

concerning?

Nesa said:

Trial date set for FMG, ASIC showdown
28-August-08 by Staff Reporters

Fortescue Metals Group Ltd and its chief executive Andrew Forrest will head to court in April next year to fight claims made by the corporate watchdog.

ABC radio reported the Australian Securities and Investments Commission claim FMG and Mr Forrest had allegedly mislead investors by claiming it had a binding contract to build and finance a railway, port and mine before its Pilbara operations were built in 2004.

If ASIC wins the case, it is calling for Mr Forrest to be disqualified from running a company and to pay for FMG's fines of more than $3 million.

http://www.wabusinessnews.com.au/en-story/1/66004/Trial-date-set-for-FMG-ASIC-showdown




concerning?

Click to expand...

even if twiggy did get disqualified, he will prob remain a member on the board..

and $3 million is a drop in the ocean for him..


wait for the news to come within the next month or so good luck

this has been dragging on for some time, and must be very distracting for forrest
which makes it a negative for share holders,

having said that, Forrest knows that ASIC has him in their sights (what a great trophy) and FMG has been very cautious in how they talk to the public.

the gist of the case is that what fmg announced as a binding mou, the chinese later announced as a non binding mou. mou (Memorandum of Understanding)

Having said that anyone who bought fmg at that time and held, would be very happy as i strongly doubt that any share has performed as well as fmg over that time frame.

their is a chinese article i have about this somewhere, basically the chinese changed meaning so as to depress fmg share price so they could buy 85% of fmg cheaply, but they failed.

Fortescue to use preference shares to fund expansion

IRON ore miner Fortescue Metals Group is to hold a shareholder meeting to change its constitution to allow it to issue preference shares.

Fortescue (ASX: FMG) said preference shares were just one of the funding options being advanced as part of an overall program to fund the expansion of its operations in the Pilbara region of Western Australia.

The miner said it had received a subscription application for preference shares for an aggregate of $140 million, conditional on a successful vote at the shareholder meeting, to be held on September 30.

The project to be funded comprises a port facility at Port Hedland, iron ore mining operations within the Chichester Range and a railway line that links these two sites.

Fortescue also said Friday it had received product prepayment commitments for $US275 million from five Chinese steel mills to help fund the expansion plans.

The Perth-based company said $US68 million has been received so far with the balance due over the next few months.

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http://www.theaustralian.news.com.au/story/0,25197,24260576-5005200,00.html

Aug. 29 (Bloomberg) -- Fortescue Metals Group Ltd., an Australian iron ore producer, plans to sell preference shares for the first time to help fund expansion.

Fortescue is seeking shareholder support to change its constitution to allow it to sell the shares, the Perth-based company said today in a statement to the Australian stock exchange.

The company has already received a subscription application for shares worth A$140 million ($121 million), Fortescue said. The application is contingent on approval at a Sept. 30 shareholder meeting.

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http://www.bloomberg.com/apps/news?pid=20601081&sid=aUPlsmokPVEc&refer=australia

CAB SAV said:

AGRO, will prob be in after next cap raising. At present they need to prove & maintain production (and should) and have promised to ramp up to 45mt by years end. Big costly task from 24mt to 45mt then 55mt up.
they needed dollars 06, 07 and I suspect 08. Nothing wrong with that, but price dips nicely after cap raising.
Assuming markets keep pooping themselves this year, could be few dollars cheaper.

Click to expand...

SP week beginning 23/8/06 $10.20, funds required announcement,SP $7.85 week beginning 15/9/06
SP week beginning 20/7/07 $40.00, funds required announcement, SP $27.84
week beginning 24/8/07

further to agro's post:

Preference issue for Fortescue
30th August 2008, 10:30 WST

Fortescue Metals Group yesterday confirmed it planned to sell preference shares for the first time to help fund its ambitious expansion.

The company will ask a shareholders meeting next month to vote to change its constitution to allow the sale of the shares, but did not reveal how many would be sold. The stock will pay a yield of 9 per cent and have a term of 8.5 years.

Fortescue said it had received a subscription application for $140 million from an unidentified investor as part of the proposed sale.

WestBusiness revealed two weeks ago that the company was looking to raise between $500 million and $1 billion in its first equity raising since it tapped the market for $504 million through a placement at $3.60 a share in July last year.

Fortescue wants to almost triple output to feed rising demand from steel mills in China and benefit from record prices.

Patersons Securities analyst Alex Passmore said the first stage of the company’s expansion from 55 million tonnes a year to 120mtpa may cost more than $3.9 billion.

“The preference shares are a small step in the overall financing,” Mr Passmore said. “There are a lot of people in the US who would like a 9 per cent coupon rate at the moment.”

The preference shares have limited voting rights and won’t change the level of control of major shareholders, including chief executive Andrew Forrest, who has 35.8 per cent of the company, or the Philip Falcone-controlled hedge fund Harbinger Capital Management, which has a 15.8 per cent stake.

Fortescue said yesterday it had received $US275 million ($316 million) as prepayment for iron ore from five Chinese steel mills.

MADALENE PEARSON

http://www.thewest.com.au/default.aspx?MenuID=3&ContentID=95037

question to ponder:

"why is FMG up (and associates of FMG: e.g. AGO, BRM, FRS) up today and BHP and RIO down?"


anwser (speculating):

"because they won support for the second rail way imho, look at it this way with some foresight bias - why did FMG announce the pref shares all of a sudden??, funding for expansion"

my