Andrew Forrest's share buying spree fortifies FortescueMICHAEL...

Andrew Forrest's share buying spree fortifies Fortescue
MICHAEL BENNET From: The Australian September 17, 2011
Andrew Forrest, chairman of Fortescue Metals Group, has been putting his money into the company's stocks Source: The Australian
ANDREW Forrest has picked up his buying of stock in Fortescue Metals Group for senior executives, taking his total outlay to $100 million, as iron ore prices outperform stockmarkets.

In the past three weeks, the founder and former chief executive of Fortescue has been buying stock on-market for "certain senior executives" of the miner via financing provided by Mr Forrest's private company, The Metal Group.

After previous parcels of $30.8m and $26.8m, Fortescue yesterday advised Mr Forrest had snapped up a further $42.2m of stock, taking the total to about $100m. Late last month, Fortescue's board allowed the executives to accept "financial assistance" from The Metal Group to buy shares.

Mr Forrest, who this year stepped down to non-executive chairman, has an estimated wealth of $6 billion, largely via his directly-held 31 per cent of Fortescue, which he built into an $18.8bn company and the third-biggest iron ore producer in Australia behind Rio Tinto and BHP Billiton.




But which executives are taking loans from Mr Forrest and on what terms has not been disclosed, with a company spokesman yesterday declining to comment because they are agreements between Mr Forrest and the parties, not Fortescue.

The company said Mr Forrest would most likely continue to buy stock through the arrangements, but unless the executives were directors or go above the 5 per cent, they would remain anonymous. Based on the available data, Mr Forrest has acquired the stock at about $6 a share, handing the executives a return after Fortescue yesterday closed up 21c at $6.09 in a positive broader market. Fortescue, which is planning to almost triple output from its Pilbara operations, has outperformed the broader market this month.

It has risen 0.7 per cent compared with a 3.4 per cent fall for the S&P/ASX 200, suggesting Mr Forrest's buying has provided some support.

Analysts also remain positive on iron ore despite the fall in miners' stock prices, with RBS this week affirming Fortescue as its top pick of the sector, ahead of Rio and Atlas Iron, as spot iron ore prices hold at about $US180 ($173.7) a tonne as stock prices continue to fall on global concerns.

"The tightness in prices, driven by capacity additions and lagging demand, is likely to continue over the next few years," said analyst Lyndon Fagan, who has a buy and $8.03 target price on Fortescue.

Goldman Sachs, which rates Fortescue a buy with a target of $8.01, this month lifted its price forecast for Pilbara iron ore "fines" for calendar 2013 by 33.3 per cent to $US160 per tonne, and by 32 per cent to $US125 for 2014, on its "growing confidence" market tightness would persist.

But Goldman held its 2015 forecast at $US95, reflecting its view of lower long-term prices.