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Fortescue Metals Group Ltd FMG

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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.

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