charlie aiken, page-3

dont know if this has been posted before. you can access this news on mymarketview.com.au

http://www.mymarketview.com.au/morning_note_details.php?id=MTM0MQ==


FORTESQUE METALS (FMG)

Fortescue Metals Group's decision to slow down its expansion plans may buy the Andrew Forrest-led miner some time to assess the iron ore markets, but is "value-destroying in the long term," CBA analyst Andrew Hines wrote in a research note to clients on Wednesday.

Hines has examined the implications if iron ore prices do not recover but Fortescue tries to avoid raising equity by continuing to defer the move from 115Mtpa to 155Mtpa. He says there are two main reasons why he doesn't think this is a viable strategy.

The 40Mtpa increase (from 115Mtpa to 155Mtpa) is the most valuable tonnes in the expansion, according to Hines. At spot iron ore prices, "staying at 115Mtpa reduces our valuation to just $1.50 per share,"

Hines also reckons it's not certain that an equity raising can be avoided in fiscal year 2014, even if Fortescue does not move beyond 115Mtpa.

"Our analysis indicates that at spot iron ore prices and 115Mtpa, Fortescue will still need an additional $US2.5 billion in capital in FY14, which is unlikely to be available from debt markets."