Harbinger still among the bulls

PHILIP FALCONE, who heads the $US23 billion ($24 billion) US hedge fund Harbinger Capital Partners - a major investor in Fortescue Metals, Murchison Metals, Midwest, Moly Mines and Poseidon Nickel - said he remains bullish on commodities.

PHILIP FALCONE, who heads the $US23 billion ($24 billion) US hedge fund Harbinger Capital Partners - a major investor in Fortescue Metals, Murchison Metals, Midwest, Moly Mines and Poseidon Nickel - said he remains bullish on commodities.

Mr Falcone said that while demand and pricing of metals was volatile, they would over time continue to go higher.

"I like the prospect of commodities on general supply/demand factors," he told the Herald in a rare interview yesterday, refuting a US report that he believed the cycle had peaked.

Amid speculation he has been looking to offload his 15.85 per cent stake in Fortescue, worth $3.6 billion, Mr Falcone said he had been approached with many offers but had not yet decided whether to sell any shares.

"If I make a decision, it will clearly not be my entire position that I am parting with," he said. "I think the stock is very undervalued. We like the prospects for the company."

Despite his bullish outlook for commodities, Mr Falcone said he did not own shares in BHP Billiton or Rio Tinto. "I think they are both attractive companies, but I think the growth prospects are tremendous for Fortescue," he said. "I don't see that kind of growth for BHP or Rio."

Mr Falcone said the "real risk" once associated with Fortescue had ended once it successfully started production in May.

"They have proven they can actually produce," he said. "From zero to 1 million tonnes is more risky than from 1 million to 150 million."

He said the bold personality of Fortescue's chief executive, Andrew Forrest - rather than the bureaucracy of larger companies - had been needed to get its project off the ground.

Harbinger recently accumulated a 16.2 per cent stake in iron ore miner Midwest, now controlled by Chinese metals trader Sinosteel. Sinosteel's takeover offer remains open, but Mr Falcone said he would not tender into the bid and would instead consider different options. "There's a lot that [Sinosteel] can't do because of our position," he said.

Despite his large holding in several Australian companies, Mr Falcone said he had not visited the country recently, but he had been to South-East Asia.

He said he did not believe China's economy was completely decoupled from the US economy.

"The United States is still the United States and the most powerful country in the world, and it's tough to say anyone will be immune to it," he said.

But as the Chinese Government was planning its economy out to 2030 or 2035 he said mining investments should pay off over time. "The prices down the road will be higher than where they are today if you are a patient investor, and that is what we are," he said.

"One thing I can be certain of is they are going to continue to build roads, bridges and other infrastructure, not only in China but in South-East Asia."


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