Below-average margins, high debt, and ambitious growth plans make for a leveraged iron ore bet.
Our fair value estimate for Fortescue remains AUD 2.80 per share, with the first-half fiscal 2017 result as expected. Excluding a USD 49 million pretax foreign exchange gain, a balance sheet adjustment, adjusted net profit increased 6 times to USD 1.2 billion. The result was primarily driven by the higher iron ore price. Fortescue realised a 28% rise in the iron ore price to USD 52 per wet tonne while shipments increased 5% to 86 million tonnes. The cost performance was strong, with absolute cos...Fortescue Metals Group is an iron ore producer. As of June 30 2016, Co.'s operations had four mine sites in the Pilbara. The Chichester Hub, which includes the Cloudbreak and Christmas Creek mines, is located in the Chichester Ranges and the Solomon Hub, in the Hamersley Ranges, includes the Firetail and Kings Valley mines. Co. owns and operates an integrated supply chain including its Herb Elliott Port in Port Hedland and a heavy haul railway with over 620km of track. As of June 30 2016, Co.'s total hematite ore proved and probable reserves were 2.17 billion tonnes. Also, as of June 30 2016, Co.'s total magnetite ore proved and probable reserves were 705.0 million tonnes.
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