{"id":52994,"date":"2014-06-19T02:52:27","date_gmt":"2014-06-19T06:52:27","guid":{"rendered":"http:\/\/countingpips.com\/?p=52994"},"modified":"2014-06-19T02:52:27","modified_gmt":"2014-06-19T06:52:27","slug":"why-the-fortescue-share-price-rose-today-2","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2014\/06\/why-the-fortescue-share-price-rose-today-2\/","title":{"rendered":"Why the Fortescue Share Price Rose Today"},"content":{"rendered":"
June 19, 2014<\/div>
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By MoneyMorning.com.au<\/u><\/a><\/p>\n

What Happened to the Fortescue Metals Share Price?<\/h2>\n

Shares of Fortescue Metal Group [ASX:FMG]<\/strong> continued their volatile run, rising 4.98%. Shares closed at $4.22 on Thursday. <\/p>\n

Why Did This Happen to FMG Shares?<\/h2>\n

Fortescue Metals Group Ltd is an iron ore production and exploration company<\/a> 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 30% since the beginning of this year. <\/p>\n

Fortescue is effectively a leveraged play on the iron ore price, which has fallen over 30% for the year to around US$91.00 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>

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Further declines in the price of iron ore<\/a> will squeeze Fortescue\u2019s profit margin, making it difficult for the miner to pay down 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 the completion of the Kings Valley project.<\/p>\n

The stock remains below its major long term support level of $4.40. This indicates lower prices are still on the cards \u2014 a volatile share price is a certainty. <\/p>\n

Fortescue\u2019s share price direction will depend on the iron ore price. At the current iron ore price, Fortescue will struggle to repay its debt. This indicates that Fortescue speculators may continue to hit the sell trigger in panic. <\/p>\n

Nonetheless, if iron ore rallies to around the US$115\u2013120 region, the share price could rise above the $6 level in the next few months as a result of increased production. <\/p>\n

Jason Stevenson+<\/a>
\n Resources Analyst, Diggers and Drillers<\/em><\/strong><\/p>\n<\/p>\n

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

By MoneyMorning.com.au What Happened to the Fortescue Metals Share Price? Shares of Fortescue Metal Group [ASX:FMG] continued their volatile run, rising 4.98%. Shares closed at $4.22 on Thursday. Why Did This Happen to FMG Shares? Fortescue Metals Group Ltd is an iron ore production and exploration company with assets located in the Pilbara region of […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-52994","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/52994","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=52994"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/52994\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=52994"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=52994"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=52994"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}