{"id":53151,"date":"2014-06-23T03:08:49","date_gmt":"2014-06-23T07:08:49","guid":{"rendered":"http:\/\/countingpips.com\/?p=53151"},"modified":"2014-06-23T03:08:49","modified_gmt":"2014-06-23T07:08:49","slug":"why-the-fortescue-share-price-rose-today-3","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2014\/06\/why-the-fortescue-share-price-rose-today-3\/","title":{"rendered":"Why the Fortescue Share Price Rose Today"},"content":{"rendered":"
June 23, 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 4.03%. Shares closed at $4.39 on Monday. The share price lift follows a bounce in the iron ore price last Friday, responding to rumours that the Chinese will soon implement a stimulus package. <\/p>\n

Why Did This Happen to FMG Shares?<\/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 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$92.10 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 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<\/a> 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 4.03%. Shares closed at $4.39 on Monday. The share price lift follows a bounce in the iron ore price last Friday, responding to rumours that the Chinese will soon implement a stimulus package. Why […]<\/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-53151","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/53151","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=53151"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/53151\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=53151"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=53151"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=53151"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}