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Fortesque Metals

By Dan Stratful

Friday 17th February 2012

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Iron ore miner Fortesque Metals (ASX: FMG) has been the subject of takeover rumors recently after a mystery buyer bought a 2.9% stake last week. The buyer is thought to be Canada's Teck Resources or possibly Xstrata, while the planned merger between Xstrata and Glencore is adding further speculation of M&A activity.

The market is speculating that whoever bought the stake in FMG doesn’t have iron ore exposure and is gaining that by purchasing a stake in FMG.

The M&A speculation comes as FMG this week reported its first half results for the half year ending 31 December 2011 (1H). 1H total shipments were 27.1 million tonnes of ore compared to 20.9 million tonnes in the prior 1H. The interim result was a record, and interim net profit increased 155% to US$801 million, on revenue growth of 33%.

FMG carries a lot of debt on its balance sheet, and uses significantly higher levels of gearing than BHP and RIO, but it is growing so fast, its high debt levels can be justified. 

FMG is well on its way to achieving its first stage expansion target of 55 million tones per annum (mtpa) while rapidly building towards a higher goal of 155mtpa.

As the forth largest iron ore miner in the world, FMG is ideally placed to supply SE Asia’s growing demand for iron ore, a key ingredient in the steel making process.

Status: GROWTH BUY

FMG’s shares today traded at $5.34

For portfolio, sharemarket and fixed income enquires contact:
Dan Stratful at Investment Research Group (IRG)
Authorised Financial Adviser (AFA)
0800 437 8489, 09 304 0232, dan.stratful@irg.co.nz
**A disclosure statement is available, on request and free of charge.


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