Roy Hill boss cool on buying rail, port stake
Barry Fitzgerald, the chief executive of Roy Hill Holdings, admitted he had studied the sale process that Mr Forrest's Fortescue Metals has been running for a stake in its port and rail assets.
But he poured cold water on the notion that Roy Hill might emerge as the buyer of a 30 to 40 per cent stake in Fortescue's infrastructure holding company, telling a conference in Perth that Roy Hill would prefer to control its own infrastructure assets.
Mr Fitzgerald is charged with developing Australia's next big iron ore mine - plus port and rail solutions - at a time when iron ore prices appear to be past their peak. But he said the project, estimated to cost $US7 billion to $US10 billion, was being assessed against long-term iron ore price estimates, rather than the volatile spot price.
Roy Hill has been pursuing funding support for the mine for several months and Mr Fitzgerald said that process should be complete by the end of 2013. He said 50 per cent of the mine's future supply was already tied to offtake agreements.
Fortescue's rail and ports sale is expected to raise about $US3 billion for the company, and was previously tipped to be concluded about this time.
Fortescue chief executive Nev Power told a conference in Hong Kong the sale of a minority stake in the infrastructure assets was progressing well, and a shortlist of candidates featured pension funds and infrastructure companies. He did not mention mining companies but suggested the process could be completed by June.
The public appearances by Mr Power and Mr Fitzgerald came as investors punished iron ore stocks with another round of fierce selling.
The catalyst this time was not movements in the benchmark iron ore price - which remained steady at $US134 a tonne - but a decision by Goldman Sachs' London office to downgrade its iron ore price forecasts for the next three years.
Goldman Sachs previously had been one of the more bullish iron ore forecasters with its prediction that the benchmark price would average $US144 a tonne in 2013.
Its revised forecast of $US139 a tonne remains relatively bullish, but the downgrade was enough for Goldman's UK team to change its Rio Tinto rating to "conviction sell".
The change came despite Goldman's Australian analysts retaining a "neutral" rating on Rio. The ensuing rout on European markets spread to the ASX on Wednesday morning where shares in Rio, BHP Billiton, Fortescue and Atlas Iron lost several percentage points.
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Barry Fitzgerald, CEO of Roy Hill Holdings, said Roy Hill is unlikely to buy a 30–40% stake in Fortescue’s infrastructure. He studied Fortescue’s sale process but said Roy Hill would prefer to control its own rail and port assets rather than be a minority partner.
The Roy Hill project is estimated to cost between US$7 billion and US$10 billion. Fitzgerald said the project is being assessed against long‑term iron ore price estimates rather than volatile spot prices.
Roy Hill has been seeking funding support for several months and expected that process to be complete by the end of 2013. Around 50% of the mine’s future supply was already tied to offtake agreements, according to the article.
Fortescue is selling a minority stake in its rail and ports holding company—reportedly 30–40%—in a process expected to raise about US$3 billion. CEO Nev Power said a shortlist includes pension funds and infrastructure companies, and the sale process could be completed by June.
Goldman Sachs’ London office downgraded its iron ore price forecasts for the next three years (from a previously more bullish outlook). That downgrade prompted Goldman’s UK team to change its Rio Tinto rating to “conviction sell,” which contributed to heavy selling in iron ore stocks.
The article noted the benchmark iron ore price remained steady at US$134 a tonne. It also said Goldman Sachs had revised a previous forecast (which had predicted US$144 a tonne for 2013) to around US$139 a tonne in its updated view.
Shares in Rio Tinto, BHP Billiton, Fortescue and Atlas Iron fell by several percentage points as the rout spread to the ASX following the downgrade and related market reaction.
The article highlights that infrastructure decisions (whether companies keep control or sell stakes) and analyst forecasts can move iron ore stocks. In this case, a potential sale of Fortescue’s infrastructure and a Goldman Sachs downgrade helped trigger widespread selling in the sector—showing how company strategy and price forecasts can affect investor sentiment.
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