{"id":50901,"date":"2014-05-14T02:30:47","date_gmt":"2014-05-14T06:30:47","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=50901"},"modified":"2014-05-14T02:30:48","modified_gmt":"2014-05-14T06:30:48","slug":"why-fortescue-shares-fell-today","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2014\/05\/14\/why-fortescue-shares-fell-today\/","title":{"rendered":"Why Fortescue Shares Fell Today"},"content":{"rendered":"

By MoneyMorning.com.au<\/u><\/a><\/p>\n

What happened to the Fortescue share price?<\/h2>\n

Shares of Fortescue Metal Group [ASX:FMG]<\/strong> dropped slightly by 1.46% on Wednesday, closing at $4.73. This is close to the lowest it\u2019s been since 8th October 2013. <\/p>\n

Why did FMG drop?<\/h2>\n

Fortescue Metals Group Ltd is an iron ore production and exploration company with assets located in the Pilbara region of Western Australia.<\/p>\n

Fortescue\u2019s share price has struggled recently, despite its plans to boost iron ore production by 35% in the next quarter. The company\u2019s share price has fallen by 20% since the beginning of this year. <\/p>\n

Effectively, Fortescue is a leveraged play on the iron ore price, which has fallen 23% for the year to around US$104 per tonne. <\/p>\n

The issue is two-fold:
\n1)\tFortescue has an extremely high cost of production. Analysis suggests that if the iron ore price falls below US$80 per tonne, Fortescue will be losing money.
\n2)\tFortescue\u2019s net debt (cash less debt) represents roughly 55% of its market capitalisation of around US$8.6 billion. This is very high. <\/p>\n

If the iron ore price falls further, its profit margin will be squeezed. As such, it will become more difficult for Fortescue to repay its debt. This is probably what worries punters. <\/p>\n

What now for the Fortescue Metal Group?<\/h2>\n

FMG has recently reached its long-term ore production goal of 155 million tonnes per year, thanks to completion of the Kings Valley project.<\/p>\n

At the moment, Fortescue\u2019s share price has broken through its technical downtrend support line. Indications suggest the share price may fall further from here. Major long term support for the stock exists around the $4.40 level.<\/p>\n

Nonetheless, if iron ore rallies, the share price could rise above the six dollar level in the next few months as a result of increasing production.
\n 
\nJason Stevenson+<\/a>
\nResources Analyst, Diggers and Drillers<\/em><\/strong><\/p>\n

Join Money Morning on Google+ <\/u><\/a><\/strong><\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n


\nBy MoneyMorning.com.au<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By MoneyMorning.com.au What happened to the Fortescue share price? Shares of Fortescue Metal Group [ASX:FMG] dropped slightly by 1.46% on Wednesday, closing at $4.73. This is close to the lowest it\u2019s been since 8th October 2013. Why did FMG drop? Fortescue Metals Group Ltd is an iron ore production and exploration company with assets located … <\/p>\n

Continue reading “Why Fortescue Shares Fell Today”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-50901","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/50901","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/comments?post=50901"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/50901\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/media?parent=50901"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/categories?post=50901"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/tags?post=50901"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}