Barry Dawes - Martin Place Securities - short TCI interview

Barry Dawes from Martin Place Securities has been picking Fortescue as a Top Stock with The Constant Investor since about December 2016:

https://theconstantinvestor.com/top_stock/barry-dawes/fortescue/

His latest update is a good one - can't paste it all as it's paywalled but here's the best bits:

"I think that this is an excellent company with an outstanding track record in terms of production, in terms of the technology that’s been applied right throughout the production stream, right from the exploration process, mine development processing, the railway, the port facility and Fortescue has even bought its own ships with particular characteristics that allow faster loading, easier navigation through the port and all these things in a high volume operation do make significant gains when you’ve got a revenue base of $7-8 billion.  If you can pick up 1 or 2% here in terms of revenue and also on the costs, it goes through a very good operation.

Fortescue has been able to bring its costs right down, such that it’s the lowest cost producer of iron ore of all the major producers, so it’s in an outstanding position.  It’s brought its debt down and it’s recently done a change in that debt structure which gives a bit more flexibility.  They’ve reduced their debt by about $8 billion dollars over the past four years and that will continue.  The company’s got the flexibility to repay that debt as it wishes and as it’s also been able to cut about $140 million off its annual interest bill through that restructuring.  So that’s all very nice.  The company’s doing well.  The iron ore market is holding up very well.  What we are seeing though is a discount for the lower grade material which is what Fortescue has.  That’s at quite a significant discount to the general 62% Fe market for its 58% material.  But I think that discount will be reduced as we go through the next year or so and I do think iron ore prices will be higher.

We’re going to find that Fortescue’s net price will actually rise faster.  One thing we need to keep in mind is that ocean freight rates have been rising as well over the past year or so and as the products are sold on a delivered basis, there is margin pressure for exported iron.  Fortescue having its own ships is able to reduce the volatility and the exposure for that.  Next stage is that there’s growth opportunities.  Magnetite is the highest quality iron product as a steel mill feed.  That can be in the high 60s – low 70% Fe, compared to the 57-58% that Fortescue has from its own hematite/goethite product.

It’s looking to develop some magnetite, so there’s growth opportunities there.  I see magnetite being the product of choice for so many steel mills around the world in the next decade.  Fortescue will be well placed there.  It’s also looking internationally, it’s in South America and it’s also looking at some copper plays in New South Wales and in other parts of Australia."