Fortescue Metals Group (FMG)

By Jason Fittler

FMG is an iron ore production and exploration company with assets located in Pilbara region of Western Australia.

FMG has a tenement holding of around 88,000 sq. km. FMG currently holds reserves of over 2.2Bt of hematite ore within the region.

FMG resource status currently stands at 15.6Bt, with first half of financial year 2013 total ore mined and ore shipped of 35Mt and 35.7Mt respectively.

FMG provided guidance on the following three areas: the prompt and permanent reduction in operating and total costs; the increasing financial strength of the company; and an update on the potential sale of a minority interest in its port and rail assets.

The company's strength is underlined by its growing cash balance and absence of debt repayments until November 2015. Cash on hand as at 30 June 2013 is expected to be in the order of $1.7bn to $2.0bn.

There are no financial maintenance covenants in any of the company's debt facilities, which combined with the strong cash balance limits any impact from iron ore price movements.

The company's estimated net debt position at 30 June 2013 will be approximately US$10bn, taking into consideration cash on hand and excluding lease liabilities.

The company has lost around 36% on the share value over the past 12-months along with having a very volatile share price. 

With a gross dividend of 1.8% and given the current low price this is not a stock I would recommend

For more information on Fortescue Metals Group (FMG) please contact us on 07 4771 4577.