FMG quickly emerged from concept in 2003 to the third largest miner behind BHP and RIO.
The 2011 results were below our expectations with revenue lower than expected due to larger product discounts. This has reduced our valuation to $5.35.
The recent plunge in spot iron ore prices is a short-lived dip and prices will rebound as Chinese steel mills re-enter the market, probably before Christmas. Fortescue Metals Group Chairman Andrew Forrest said. "It will be a temporary dip," he told reporters, in reference to the spot price falling to below US$150 per metric ton, from more than US$190 a ton in February. The fall reflected concerns within the market that Chinese buyers are becoming more cautious as the global economic recovery stutters.
With the stock tracking lower than the index and current diverging from the index this is one stock which I am happy to sit on the side lines and watch for now.
Based on the news coming out of China and the general issue around mining stocks in Australia with the carbon tax and mining tax coming in to play in 2012, I prefer the larger players being BHP and RIO over FMG.
For more information on Fortescue Metals Group (FMG) please contact us on 07 4771 4577.