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Fortescue Metals Group Ltd FMG

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Morningstar’s Analysis

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Fair Value Estimates Lowered for Most Iron Ore-Exposed Miners With Lower Near-Term Iron Ore Prices

Mathew Hodge, CFA Regional Director

Analyst Note

| Mathew Hodge, CFA |

Of the diversified majors, we now think BHP is the cheapest, trading at close to a 10% discount to our fair value estimate. We lower our fair value estimates for our iron ore-exposed miners Fortescue, Vale, Rio Tinto, BHP, and Deterra Royalties by about 30% to AUD 10 per share, 30% to USD 13 per share, 4% to AUD 89 per share, 5% to AUD 39 per share, and 7% to AUD 3.35 per share, respectively, after incorporating the lower iron ore futures prices given the significant softening in Chinese demand.

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Company Profile

Business Description

Fortescue Metals Group is an Australia-based iron ore miner. It has grown from obscurity at the start of 2008 to become the world's fourth-largest producer. Growth was fuelled by debt, now repaid. Expansion from 55 million tonnes in fiscal 2012 to about 180 million tonnes in 2020 means Fortescue supplies nearly 10% of global seaborne iron ore. However, with longer-term demand likely to decline, as China's economy matures, we expect Fortescue's future margins to be below historical averages.

Contact
87 Adelaide Terrace, Level 2, East Perth
Perth, WA, 6004, Australia
T +61 862188888
Sector Basic Materials
Industry Other Industrial Metals & Mining
Most Recent Earnings
Fiscal Year End Jun 30, 2022
Stock Type
Employees 3,898