Fortescue Metals
Fortescue Metals is an ASX 50 company that has defined about 4.5 billion tonnes of Resources of Iron Ore, including 1.625 billion tonnes of Reserves already delineated from less than 10 per cent of its 69,000 square kilometres of Pilbara tenements,
Fortescue's Forrest upbeat on China iron ore demand '09
Fortescue Metals (ASX:FMG) Chief Executive Officer, Andrew Forrest provided following information on FMG at the company's AGM.
Chinese growth rate of nine per cent is still very strong. Demand for Fortescue’s high “value in use” product is still strong.
Iron ore supply side
Of China’s US$586billion stimulus package, 60% is directed toward infrastructure. Steel production forecast 500 mta for 2009 - same as 2007/08 and up 20 per cent on 2006. China produces 400 mta iron ore but predominately high cost pellet at c.US$60/tn. Supply side will be constrained by credit squeeze. Pellets are very capital intensive Medium and long term “steel intensity” growth for China and India remains.
FMG Financials
Trading Profit to end Sept was A$360 million. Cash as at end Sept A$624 million. Long term debt maturity profile and an unhedged Forex position is gaining maximum benefit from devalued AU$.
Affirmation of product and expanded 2009 offtake contract. FMG has bought back debt at 32 per cent discount
Summary
The Chinese market is currently tight but product is still moving. Fortescue’s product mix is suited to the current conditions. Strong cash position and trading profit history. Low end of the cost curve offers the best protection in volatile markets and expect Chinese stimulus package to kick in by 1st quarter 2009.
FMG was trading up 12.4%, to $1.45
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