Time to analysis FMG prospects for the rest of the year and iron ore prices. To the dismay of all the down rampers and the the analysts of the major investment banks the iron ore price in around $150.00 a tonne.
WHY?
The iron ore price was on the way up before the Ukraine conflict so that can not be blamed for the increase in iron ore prices alone. Demand in China is increasing as it boosts its economy after Covid and the self inflicted slowdowns in the building industry. The Chinese government will do whatever it takes to keep its economy humming along to provide jobs for its population. The rains in Brazil earlier this year year has once again restricted supply. Put simply the iron ore market is very evenly supplied, with no large increases in volumes coming onto the market.
Simandou is still a pipe dream, it was called the Pilbara killer by some analysts. It was supposed to be in operation in 2025, RIO has a big interest in the mines and has apparently been trying to sell its interest for years, some work has been done by the Chinese but at Simandou it rains 2 metres of rain per year and on the coast of Guinea where the port to export the ore will be built it can rain 4 metres per year, its an equatorial climate. The Chinese have been confronted with the difficulty of the terrain and climate as well as the distance of 600kms of rail line to be built. So no new mining provences are on the horizon.
That leaves the existing miners, BHP RIO VALE and FMG, as the major suppliers, none of these companies are expanding supply, just improving their operations and opening new mines as old mines end their commercial life. At $150.00 a ton for FE 62% or $100.00 a ton for FE 58%, FMG is making lots of money, I know, I can hear the down rampers squealing in protests and the short sellers gasp but its the facts. At current prices FMG should pay the next dividend of around $1.00 plus, even with a 70% pay out. The FFI is an interesting project that could pay off, AF is not an idiot, batteries will not power large earth moving machinery, Hydrogen may be the way forward, at least AF is thinking ahead with diesel now around $2.00 a litre retail. Its thinking ahead by management that makes companies great and no-one can claim that AF does not think far ahead. Spending a part of the profit each year hopefully will pay off if Hydrogen becomes the replacement power source for diesel. I must rather have AF approach the investment in renewables this way than borrow a bucket load of money and have it wasted.
FMG in my opinion is a great company, the only problem is the volatility of the share price, if you find it painful watching the daily fluctuations, use some of the dividend that will land in your bank account at the end of the month to buy a fishing rod and go fishing.
I have put about 20 down rampers on ignore over the last 12 months, I have never seen such a lot of rubbish comments by SELL, NONE HOLDERS in my life. They seem to be extinct now, even the pig is gone!!!
Good Luck
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