Fortescue Metals Group Ltd
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Fortescue Metals Group Ltd (FMG) is an ASX listed company which is into exploration, development, production, processing and sale of iron ore, and the transition to a global green renewables and resources Company through the activites of FFI.
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Mr Dino Otranto
Metals & Mining
What does Fortescue Metals Group (FMG) do and how does it make money?
Its boss is Australia's iron man – not in the athletic sense. Fortescue Metals Group Limited is a global leader in the iron ore industry. The company specialises in the exploration, development, production, processing and sale of iron ore in Australia and internationally. Fortescue is a core supplier of seaborne iron ore to China, Japan and South Korea.
Headquartered in East Perth, Fortescue currently owns and operates the following:
Chichester Hub — Located in the Chichester Ranges of Pilbara, WA, the Chichester Hub is comprised of the Cloudbreak and Christmas Creek mines. The hub has an annual capacity of approximately 100 million tonnes per annum (mtpa) of iron ore.
Solomon Hub — Situated in the Hamersley ranges of Pilbara and 120 kilometres west of the Chichester Hub, the Solomon Hub is comprised of the Firetail, Kings Valley, and Queens Valley mines. Its annual capacity is of approximately 75 mtpa of iron ore.
Western Hub — Currently in development, the Western Hub is home to the Eliwana mine. This hub contains significant amounts of high iron content bedded iron ore. The development is located 140 kilometres west of the Solomon Hub.
Iron Bridge Magnetite Project — Located 145 kilometres south of Port Hedland, the project includes the North Star and Glacier Valley Magnetite ore bodies. Still under development, the project should eventually deliver 22 mtpa of high grade 67% Fe magnetite concentrate product. It's an unincorporated joint venture between Fortescue’s subsidiary FMG Iron Bridge and Formosa Steel IB.
Fortescue is also currently exploring for copper across 1,350 square kilometres of land in Ecuador, and for copper-gold across 3,230 square kilometres in Argentina. It is also assessing further mining opportunities in Peru, Chile, Brazil, Portugal and Kazakhstan.
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Is Fortescue Metals a profitable company?
Yes, Fortescue Metals is profitable and its financials are impressive.
The company’s revenue rose from A$13.93b to A$19.12b to A$29.87b in FY2019, FY2020 and FY2021, respectively. Net income rose at a compound annual growth rate of 75.9% over the past three financial years too, from A$4.46b to A$7.06b to A$13.8b.
At the end of FY2021, the company held A$12.96b of free cash flow on its books.
Is FMG a good investment?
Some investors are enthusiastic about FMG stock as the company has been a consistent dividend distributor for more than a decade. The company’s financials are also immensely strong.
However, other investors are less excited. As Fortescue operates in the iron ore industry, the FMG stock price is heavily dictated by the actual price of iron ore. This price can jump up and down depending on macroeconomic conditions and the demand for iron ore.
At this time, some investors are also wary of inflationary pressures and heightened tensions between Australia and China.
Should I invest in FMG or BHP?
FMG and BHP are suitable investments if you want to invest in one of the biggest metals and mining companies on the Australian Securities Exchange. As of 9 June 2023, $BHP has a larger market capitalisation than $FMG, at $223.55b compared to $63.11b.
Does FMG stock pay dividends?
FMG stock has distributed dividends without fail since 2011. The company usually pays twice a year but paid dividends three times in 2019.
In 2021, Fortescue paid a dividend of A$1.47 per share in March and a dividend of A$2.11 in September. The company’s latest dividend (at the time of writing), of A$0.86, was paid out to shareholders at the end of February 2022.
Fortescue also offers shareholders the option of a DRP (Dividend Reinvestment Plan) to automatically reinvest dividend payments back into FMG stock each time they are paid out.
Who owns FMG stock?
Institutions own the majority of FMG stock holding 56.5% of the total float. The general public holds 31.2% with public and private companies holding the remainder.
Some of FMG stock’s biggest owners include Hunan Valin Steel (8.76%), Capital Research and Management Company (6.65%), Emichrome Pty Ltd (3.02%), The Vanguard Group (2.76%), BlackRock (2.52%), Pendal Group Limited (0.72%), SIX Group AG, Asset Management Arm (0.47%), Geode Capital Management (0.44%) and State Street Global Advisors (0.4%).
Fortescue Chairman Dr Andrew ‘Twiggy’ Forrest AO holds the most stock via his company Tattarang Pty Ltd (36.47%) and as an individual (0.3%).
How do I buy FMG stock?
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This does not constitute financial advice. You should do your own research before making an investment decision. Past performance is not a reliable indication of future performance. No representation is made as to the timeliness, reliability, accuracy or completeness of the market data provided.