Forrest increases stake in Fortescue
Mr Forrest added another 5,207,812 shares to his majority stake in the company over recent days, in a series of on-market purchases.
The transaction was worth $23,609,032, and according to Bloomberg statistics, Mr Forrest now owns 32.78 per cent of the company.
A fresh round of share buying by Mr Forrest was not totally unexpected, given the better-than-expected dividend that Fortescue announced in August yielded more than $102 million for him.
But the purchases make a clear statement to those tempted to follow the lead of hedge fund manager Jim Chanos, who recently confirmed he was still short-selling Fortescue shares, despite the miner's strong recovery over the past year.
Mr Chanos is one of very few members of the investment community who continues to doubt Fortescue's future, with most investment banks and some ratings agencies recently expressing strong confidence in Fortescue's ability to service its debt.
Meanwhile, Fortescue has also taken charge of two ore processing facilities at its Christmas Creek mine in the Pilbara, in a move that has effectively sidelined the contractor hired to operate them.
A subsidiary of ASX listed Mineral Resources Limited had been contracted to operate the facilities for between seven and nine years, but a recent fatality is believed to have prompted Fortescue to step in and take charge.
Some well-placed sources suggested that Fortescue had been keen to take control of the operations for a while, rather than have them run by contractors.
The changeover is not expected to affect Fortescue's iron ore production guidance, and will not affect Mineral Resources' revenues immediately, with the contractor to continue being paid as normal.
But shares in Mineral Resources sank on the back of the news, falling $1.11 to $10.95, well below last Friday's $12.20.
Fortescue shares continued their three-month rally on Tuesday, rising 13¢ to $4.72.
In a research note published this week, JPMorgan analyst Lyndon Fagan upgraded his forecasts for Fortescue's net profit after tax.
Mr Fagan said Fortescue should be able to push beyond its production target of 155 million tonnes a year without spending significant amounts of money. He said efficiency measures should enable the miner to hit 160 million tonnes.
Despite iron ore prices remaining above $US130 a tonne in recent weeks, Mr Fagan said Fortescue's share price was implying a permanent iron ore price of just $US91 a tonne. JPMorgan and ANZ both expect iron ore prices to average higher than $US100 a tonne for the next three years.
Frequently Asked Questions about this Article…
After recent on‑market purchases worth $23,609,032, Andrew Forrest now owns 32.78% of Fortescue Metals Group, having added 5,207,812 shares to his majority stake.
The article notes Forrest’s fresh buying followed a better‑than‑expected August dividend (which yielded him more than $102 million) and sends a signal of confidence in Fortescue amid market debate about the miner’s outlook.
Forrest increasing his stake can be read as a strong insider vote of confidence — it may reassure some investors and contrast with those taking bearish positions — but it’s one of several factors (operational results, commodity prices, analyst views) investors should consider.
Yes. Hedge fund manager Jim Chanos has publicly confirmed he is still short‑selling Fortescue shares, making him one of the few prominent investors continuing to doubt the miner’s future despite a strong recovery over the past year.
Fortescue took charge of two ore‑processing facilities at its Christmas Creek operation in the Pilbara, effectively sidelining the contracted operator after a recent fatality — the facilities had been run by a subsidiary of Mineral Resources under a 7–9 year contract.
Mineral Resources’ shares fell $1.11 to $10.95 (from $12.20 last Friday) on the news. The article says the changeover is not expected to immediately affect Mineral Resources’ revenues because the contractor will continue to be paid as normal.
JPMorgan analyst Lyndon Fagan upgraded his forecasts for Fortescue’s net profit after tax and said the miner should be able to exceed its 155 million tonnes/year production target — potentially reaching 160 million tonnes through efficiency measures without significant additional spending.
Iron ore prices have recently been above US$130 per tonne, but the article notes Fortescue’s share price was implying a long‑term price of about US$91/tonne. JPMorgan and ANZ both expect iron ore to average above US$100/tonne over the next three years, which is more optimistic than that implied valuation.
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