FMG - Fortescue Ltd

waterbottle said:

Well why is FMG's price getting slammed? Iron ore prices are fast approaching late 2021 support levels, and this time there is a risk of a global recession.

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was heavily distracted today ( so still haven't really checked out the market only to see if any confirmation notes arrived )

so thanks

a $14 handle is mildly attractive to me

will probably crunch some numbers for Monday and see if i can nibble a few extra ( am definitely NOT backing up the truck or even bringing a suitcase )

will also work out a sub $13 target price for a second nibble

dat111 said:

The exchange rate has gotten worse 1 USD to 1.54 AUD.. I changed my plans and purchased 25% at $10.50 USD which was executed. I have orders in for another 25% at $10.25 USD... and will purchase the remaining 50% in 25% increments at $10.00 USD and $9.75 USD.... If it goes lower...

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After today's change I have changed my plans. As I said, I made my first purchase at $10.50 USD with 25% of my planned spend. I have cancelled my second order of 25% at $10.25 USD and have replaced with $9.50 USD. I will see what happens over the next few months prior to purchasing my 3rd and 4th quarter.

againsthegrain said:

I didn't win the power ball unfortunately but ill put in a order for 13 on Wednesday, the odds are still better then power ball

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I always wonder why people willing to enter low ball bids in a near timeframe don't sell the put.

If one likes it at $13 and are willing to own 100 shares or more, it'd be optimal to sell a $13 put at a near term expiry.

If it trades there one gets it at a bit less than $13, if it doesn't one gets to keep the premium.

InsvestoBoy said:

I always wonder why people willing to enter low ball bids in a near timeframe don't sell the put.

If one likes it at $13 and are willing to own 100 shares or more, it'd be optimal to sell a $13 put at a near term expiry.

If it trades there one gets it at a bit less than $13, if it doesn't one gets to keep the premium.

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This is a good idea, I never have done puts before. I'll have to do some research. Thanx

Value Collector said:

One point in the report that is often over looked by the average punter is the realisation rate.

FMG sells ore to at is below the 62% bench mark, so the price their Ore sells at is discounted.

A year ago they were receiving less than 70% of the bench mark price close to a 35% discount. Last quarter it narrowed to 22% discount and this quarter it was 15%.

A narrowing discount is good news for FMG, as it offsets some of the price decline in the Bench mark price (bench mark price is still very good though)

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The discount narrowed again yesterday, with the fall in Iron Ore Price being mainly in the higher grades and not FMG’s 58%.




Also, I noted that the fall was mainly in port stocks which and not seaborne, which kind of makes me think it was traders dumping their holdings more so that actual steel mill trade.

Value Collector said:

The discount narrowed again yesterday, with the fall in Iron Ore Price being mainly in the higher grades and not FMG’s 58%.

View attachment 148574


Also, I noted that the fall was mainly in port stocks which and not seaborne, which kind of makes me think it was traders dumping their holdings more so that actual steel mill trade.

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i did see something about China and more lock-downs ( implying less manufacturing in China )

maybe time will tell us the real impact , China seems to have a policy of accumulating stockpiles ( to reduce potential disruptions )

Fortescue provide the following on the September 2022 Quarterly Production Report:
- Updated industry leading decarbonisation roadmap, with US$6.2 billion capital investment planned by 2030 to eliminate fossil fuel risks, saving an estimated US$3 billion by 2030 and rising to annual savings of US$818 million once fully implemented

Does anyone know how much of the US$3 billion by 2030 and $818M/year there after is attributed to governement give backs?

dat111 said:

Does anyone know how much of the US$3 billion by 2030 and $818M/year there after is attributed to governement give backs?

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In a prior report the $800 Million per year in savings was just from savings in Diesel and Natural gas they won’t be purchasing.

Good afternoon
Published Financial Review 27/10/22, Journo Peter Ker.

Fortescue’s flagship iron ore division has started the new financial year with strong export volumes but has suffered a 16 per cent surge in unit costs over the past year.

The inflationary pressures come despite relief from a lower Australian dollar, which has reduced the US dollar denominated cost of Australian wages by more than 10 per cent over the past year.

But the tight labour market and rising fuel costs more than offset the currency tailwinds, meaning Fortescue is now caught between rising costs and falling iron ore prices.

Benchmark ore with 62 per cent iron was fetching $US87.80 a tonne on October 27, well below the $US119.65 a tonne recorded by Platts for October 27 last year.
Macquarie analysts said continued lockdowns in China to curb the spread of the COVID-19 pandemic were dampening demand for iron ore while a recovery in sales in the Chinese property sector had also stalled in recent weeks.
Fortescue shipped 47.5 million tonnes of iron ore from Western Australia over the past three months – the highest volumes ever achieved by the company in the three months to September 30. UBS had expected Fortescue to ship 47 million tonnes in the period.Fortescue has told investors to expect between 187 million and 192 million tonnes of iron ore to be shipped from Western Australia in the year to June 2023. Fortescue said in August that 1 million tonnes of those exports would come from the Iron Bridge magnetite project.
Iron Bridge harvests low-grade iron deposits and uses an energy-intensive process to turn the ore into a concentrate with 67 per cent iron, under a business model that has higher costs than traditional iron ore mining but should also receive higher prices to reflect the higher iron grades. Fortescue said in July that Iron Bridge would cost between $US3.6 billion and $US3.8 billion to construct and would deliver its first iron ore before March 31, 2023.
Those cost and schedule estimates were reaffirmed on Thursday.
Those cost and schedule estimates have blown out since the project was approved in April 2019, when Fortescue said it would cost $US2.9 billion and deliver first ore before June 2022.
The original plan had Iron Bridge ramping up to full production by June 2023.

Concern that Iron ore price just below critical " $80 a tonne support level " .. suggests best time to buy BHP, FMG & RIO is when Iron ore price cycle falls to $40 a tonne (if it ever falls that low I guess as seems unlikely imo)

Macquarie opinion and targets over Iron Ore.

Macquarie price targets​

"We maintain our preferences for BHP given its organic growth options; Mineral Resource benefits from the lithium exposure, while Deterra Royalties offers low volatility exposure," said Macquarie analysts in a note on Wednesday.

The investment bank's ratings and target prices among the iron ore majors included:

• BHP: Outperform with a $45.00 target price
• Rio Tinto: Neutral with a $95.00 target price
• Fortescue Metals: Underperform with a $14.50 target price

Its about a year since FMG was this low, coming into trading range for me. Dependent on the macro China situation.

dat111 said:

After today's change I have changed my plans. As I said, I made my first purchase at $10.50 USD with 25% of my planned spend. I have cancelled my second order of 25% at $10.25 USD and have replaced with $9.50 USD. I will see what happens over the next few months prior to purchasing my 3rd and 4th quarter.

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Purchased second 25% yesterday at $9.50 USD.

Twiggy Forrest must be a difficult bugger to work for.
Fortescue has now lost 75% of its senior management with the departure of its most senior HR person.
From The Evil Murdoch Empire

Only three of the 11 members of Fortescue’s executive leadership team listed in the company’s 2021 annual report now remain with the company: chief financial officer Ian Wells, long-term legal boss Peter Huston, and former Fortescue Future Industries chief executive Julie Shuttleworth, although Ms Shuttleworth is now in a new role.

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And it seems some of the other divisions of the Forrest Empire are having departure problemas.

The company’s rapidly expanding green energy arm, Fortescue Future Industries, has also seen a wave of senior departures. FFI director of energy Rob Grant left the company shortly before Christmas, with its North America president and chief executive Paul Brown quitting in early September after only eight months in the role.
In October FFI head of projects development, Gordon Cowe – promoted to the role in May – handed in his notice, with FFI’s US head of green hydrogen and ammonia marketing also quitting to take up a role elsewhere in the industry.

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To lose one executive is unfortunate.
To lose that many is indicative of some problems.
Mick

mullokintyre said:

Twiggy Forrest must be a difficult bugger to work for.
Fortescue has now lost 75% of its senior management with the departure of its most senior HR person.
From The Evil Murdoch Empire

And it seems some of the other divisions of the Forrest Empire are having departure problemas.

To lose one executive is unfortunate.
To lose that many is indicative of some problems.
Mick

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Great info, when i read that, i am nearly happy my reentry in fmg was shortlived with a quick SL exit

mullokintyre said:

Twiggy Forrest must be a difficult bugger to work for.
Fortescue has now lost 75% of its senior management with the departure of its most senior HR person.
From The Evil Murdoch Empire

And it seems some of the other divisions of the Forrest Empire are having departure problemas.

To lose one executive is unfortunate.
To lose that many is indicative of some problems.
Mick

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didn't add in the recent dip ( didn't reach my target price )

but with the senior management he is being rather ambitious and in various areas , so they may be under extra pressure ( extra regulations to learn , extra travel ) , not everyone can up the work-effort by , say, 20% for the mid-term ( and the journey to where they are now was no walk in the park , competing with BHP , RIO and others )

i do find that statement rather amusing coming from the NWS empire though , i remember a wisdom about those living in glass houses

#

divs4ever said:

didn't add in the recent dip ( didn't reach my target price )

but with the senior management he is being rather ambitious and in various areas , so they may be under extra pressure ( extra regulations to learn , extra travel ) , not everyone can up the work-effort by , say, 20% for the mid-term ( and the journey to where they are now was no walk in the park , competing with BHP , RIO and others )

i do find that statement rather amusing coming from the NWS empire though , i remember a wisdom about those living in glass houses

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NWS is merely the medium. It should not affect reporting unless its an outright lie.
the staff did leave. The only questionable part may be the analysis as to why. That is conjecture, opinion, bias, conspiracy theory or whatever.
Mick

divs4ever said:

didn't add in the recent dip ( didn't reach my target price )

but with the senior management he is being rather ambitious and in various areas , so they may be under extra pressure ( extra regulations to learn , extra travel ) , not everyone can up the work-effort by , say, 20% for the mid-term ( and the journey to where they are now was no walk in the park , competing with BHP , RIO and others )

i do find that statement rather amusing coming from the NWS empire though , i remember a wisdom about those living in glass houses

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I think the pressure Twiggy puts on his senior management is known to be fierce. Losing/breaking that many top execs is troubling. Probably worth seeing where they went. Some could well have been promotions or serious lapses in performance. We know for example that the execs in charge of the Iron Bridge project in 2021 had to leave under a cloud because, frankly, their results were very poor.

The pressure on FFI staff will be relentless. Twiggy wants this to happen yesterday and it isn't as simple as just building mass new plants from current technology. The trick to the project will be identifying and fast tracking the best new technologies that can make hydrogen use cheap and safe. That is a rapidly moving target.

I am uneasy. IMV long term success should feature strong longer term leaders not a succession of peopl.

basilio said:

I think the pressure Twiggy puts on his senior management is known to be fierce. Losing/breaking that many top execs is troubling. Probably worth seeing where they went. Some could well have been promotions or serious lapses in performance. We know for example that the execs in charge of the Iron Bridge project in 2021 had to leave under a cloud because, frankly, their results were very poor.

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You may well be correct about promotions not working out, and if that is the case, it raises questions about their selection process.
Perhaps thats why the latest departure is from HR.
Whatever the reasons for the departures, it signals some long term issues for me.
I will be keeping out of FMG for some time unless a better and more compelling narrative comes along.
Mick

basilio said:

I think the pressure Twiggy puts on his senior management is known to be fierce. Losing/breaking that many top execs is troubling. Probably worth seeing where they went. Some could well have been promotions or serious lapses in performance. We know for example that the execs in charge of the Iron Bridge project in 2021 had to leave under a cloud because, frankly, their results were very poor.

The pressure on FFI staff will be relentless. Twiggy wants this to happen yesterday and it isn't as simple as just building mass new plants from current technology. The trick to the project will be identifying and fast tracking the best new technologies that can make hydrogen use cheap and safe. That is a rapidly moving target.

I am uneasy. IMV long term success should feature strong longer term leaders not a succession of peopl.

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i know it has been a few years since i participated in the work-force , but you don't need to be a 'slave-driver' to burn through staff , just a bit stingy on the remuneration .. all the top performers quickly find better conditions elsewhere , now i doubt that is the case at FMG ,
but i suspect the boss expects the staff to be at least as committed to projects as he is ( and that usually puts pressures on families and health )

ALSO there has been a trend in big business to frequently 'refresh' the staff with 'new blood ' ( sometimes that is a BAD thing )

mullokintyre said:

You may well be correct about promotions not working out, and if that is the case, it raises questions about their selection process.
Perhaps thats why the latest departure is from HR.
Whatever the reasons for the departures, it signals some long term issues for me.
I will be keeping out of FMG for some time unless a better and more compelling narrative comes along.
Mick

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The reality is that Twiggy owns 37% of FMG and is for all intents and purposes the driver of the direction and processes in FMG.

He is determined to move heaven and earth to make renewable energy the future cornerstone of the company and at the very least make a healthy profit. ( Frankly I can't see how any project short of printing money can be more profitable than mining 180m tones of iron ore a year at $17$ a ton and selling it for the prices they were getting last year.) In that context he will create totally unrealistic deadlines and his employees will have to somehow produce results.

I'm sure many people on ASF have been familiar with leaders like this. It isn't a safe process. It isn't comfortable. But it is exciting. It can produce outstanding results. Elon Musk and Tesla come to mind as an example of such an approach.

However I suggest that whatever happens with FFI, the meat and potatoes element of FMG (iron ore) will still be making a ton of money for years to come. At the very minimum the renewable energy projects that strip out hundreds of millions of dollars in operating costs will be effective and enhance the profitability of iron ore sales. These will not go away. If people are looking for a narrative this ongoing element of the company underpins the financial returns investors can realistically bank on.

The FFI component will add substantial value to these operations as noted and could evolve to the vision Twiggy envisages.