Back of envelope analysis.1. 2020 year Platts 62.0% CFR index...

Back of envelope analysis.

1. 2020 year Platts 62.0% CFR index averaged $93/dmt and FMG realised US$79.0/dmt, being a 16.00% discount (which has since improved).

2. September 2020 report shows Platts 62.00% CFR Index as being US$119.00/dmt, FMG realised price was US$106/dmtt or 89.00% (11.00% discount compared to Platts 62.00%.

Dividend s paid were $0.76 first half and $1.00 second half - $1.76 full year.

Let's assume that so far this year average Platts 62.00% is US $130/dmt and for the next half to June 2021 it averages $140/dmt.

So average for 2021 full year would be US$135/dmt.

Assume the worst case scenario that the realised price is 89% of the Platts 62.00% CFR Index the discount would again be 11.00% (I believe that based on media reports that the realised price may be higher and that the discount to Platts 62.00% currently is less than 10.00% as the mills are attracted to buy FMG 58.0%fe ore to save money).

The realised price for FMG would therefore be in this example US$120/dmt ($US135/dmt x 89.00%) compared to the realised price for full year 2020 of US$79/dmt this represents an increase of US$41/dmt or a mind-boggling 50.00% plus.(52.00%).

If the dividend for 2020 was $1.76, and they increase the dividend in line with the estimated increase in the realised price we could see a full year dividend for 2021 of just over $2.50 ($2.64)

If the average realised price is more than this example for the rest of December and the 6 months to June 2021 and the full year realised price averages more than US$135/dmt then we will be in for windfall dividend.

Purely speculation on my part, but the IO price seems to indicate that the realised price for the full year will be over IS$135/dmt.

One more mishap with Vale then we are off to the races again. India is now not exporting nearly as much to China as it had in previous years and needs as much IO that it can mine (now even needs to import) to satisfy its own steel mills.

FMG has a market cap as close of the day of $74.01B, No.5 top ASX listed company, now ahead of Woolworths, Wesfarmers, ANZ Bank & Westpac and only $2.0B away from overtaking NAB to be No. 4 by market cap.

Is this remarkable story for in reality a company that started in 2003 compared to the others that have been around for many decades in some cases.


September 2020 Quarterly Report


2020 FULL YEAR REPORT