Andrew Forrest\u2019s FMG copped a first strike against its remuneration report for executive and director payments defended by the mining billionaire
\nFortescue\u2019s iron ore boss says its new blend of \u201cgreen\u201d high grade and low grade iron will help FMG ride out cycles in steel market<\/p>\n
The Fortescue (ASX:FMG)<\/a> AGM in Perth yesterday was as uneventful as an ASX 20 company meeting could be that could also be fairly described as eventful.<\/p>\n Andrew Forrest\u2019s near $80 billion iron ore miner is near the apex of its historic performance, trading at a higher share price than it did at any point aside from the short-lived iron ore boom of 2021, briefly after prices hit US$237\/t.<\/p>\n A recent charge in prices has again provided FMG the steam for its magnetic run \u2014 hitting a year\u2019s high of US$133\/t yesterday. That has seen it hit those heights despite continued angst from analysts over the sustainability of its shift into the capital churning field of green energy.<\/p>\n Forrest would, no doubt, say the recent strength in FMG is a testament to the support of shareholders \u2014 more than ever before he told the room at Crown Perth\u2019s Astral Ballroom \u2014 for its transition from pure play iron ore miner to purveyor of green everything.<\/p>\n Amid it all there are notes of discontent. A first strike against FMG\u2019s remuneration report in protest against executive payments delivered to former CEO and now executive director Elizabeth Gaines and former CFO Ian Wells was the big call from shareholders not named Twiggy.<\/p>\n A massive 52.44% of votes were tabled against the company\u2019s corporate pay proposal. That vote has no immediate effect, but does mean FMG will need to improve relations with proxy advisors and institutions unhappy with the one-off payments and executive churn which included a run of a little over six months for departed metals CEO Fiona Hick.<\/p>\n Speaking after the meeting to media Forrest defended the executive payments \u2014 and payments to deputy chairman Mark Barnaba \u2014 that ran afoul of the proxy advisors\u2019 \u201crule book\u201d.<\/p>\n \u201cIt was to a couple of directors, which I needed to drag out of their nice cushy, non-executive life and make executive,\u201d Forrest said.<\/p>\n \u201cFor that kind of money it\u2019s fractional to what I\u2019d have to pay them if they weren\u2019t already very well known to Fortescue, and to our mission but it appears as a one-off payment. Such is life, it did cross their rule book. <\/p>\n \u201cWe\u2019ve spoken to them about that, said \u2018look, we didn\u2019t have a choice about this\u2019. We really needed this talent. We need them even more now. And as you can see from the shareholders everything\u2019s sweet.\u201d<\/p>\n The reaction in the room was indeed mild, to the point that no one even asked a question about the protested rem report. Motions to reappoint a string of directors including Forrest and 14-year vet Barnaba \u2014 who will relinquish a role as \u2018lead independent director\u2019 over the next 6-12 months \u2014 also went off without a hitch.<\/p>\n \u00a0<\/p>\n Iron ore prices are certainly helping with that.<\/p>\n FMG sold 192Mt of iron ore last year at cost of US$17.54\/wmt. At current prices the margins are extraordinary, even when you take into account discounts for its lower grade iron ore. It delivered an $8.2b underlying net profit after tax and paid $5.4b in dividends, around 37% of that to Forrest and his recently separated wife Nicola.<\/p>\n That also provides the juice to get Forrest\u2019s green energy business up and running, with the company announcing three FIDs yesterday committing to US$750m in funding for two green hydrogen plants in the US and Australia with a combined capacity of 19,400t and a 1500tpa green iron pilot plant at the Christmas Creek mine in the Pilbara.<\/p>\n How long will those taps continue?<\/p>\n China is a curious beast. Many of its traditional indicators \u2014 like property investment and steel mill profitability \u2014 have been awful in 2023. Yet prices have surged with port stocks at low levels and supply from the majors not quite as strong as expected.<\/p>\n That\u2019s good for Fortescue in the short term since the bulk of its iron ore is lower grade \u2014 Chinese steelmakers are in need of material but don\u2019t want to pay as much for it, meaning discounts for lower grades contract.<\/p>\n Fortescue Metals boss Dino Otranto told media yesterday the introduction of higher grade material from the green iron plant, Iron Bridge magnetite mine and Belinga in Gabon \u2014 the latter two expected to become sources of high grade feed for lower emissions steel processes than conventional blast furnaces \u2014 meant FMG\u2019s iron ore product suite would be \u2018counter-cyclical\u2019.<\/p>\n \u201cJust returning from China, my comments now is it will have a little bit more wind in its sails,\u201d he said. <\/p>\n \u201cWe\u2019ve got a product suite that\u2019s quite unique \u2014 it\u2019s countercyclical. <\/p>\n \u201cSo at the moment, with low steel margins our sector is doing very well, we\u2019re represented very lowly in stocks in China. <\/p>\n \u201cBut with Iron Bridge coming online now, we\u2019re seeing a huge demand for that product with a higher grade going into the green steel sector. <\/p>\n \u201cAnd what was quite instrumental and why we made the announcement on green iron today is it\u2019s clear that the steel mills now in China have have had a direction to go green for a segment of their portfolio by 2030.<\/p>\n \u201cCoupled with that we\u2019re still seeing demand of about a billion tonnes of crude steel coming out of China. So our products are well positioned, certainly for the next coming years.\u201d<\/p>\n FMG expects to deliver its first shipment next week from Belinga, though plans to ship as much as 2Mt in its first year have been dialled back to around 100-200,000t, with studies and drilling for a larger scale operation still ongoing.<\/p>\n The US$4b Iron Bridge has seen its guidance for 2023-24 cut from 7Mt to 5Mt, but FMG still says it can hit nameplate of 22Mtpa within two years \u2014 expected to be around August 2025.<\/p>\n \u00a0<\/p>\n FMG is not the only large Aussie miner confident in the near term outlook for iron ore.<\/p>\n Mineral Resources (ASX:MIN) <\/a>expects to open the 35Mtpa Onslow Iron project in mid-2024, in which it will have a stake of a little over 60%.<\/p>\n Boss Chris Ellison said at last week\u2019s AGM the miner more known currently for its lithium ambitions saw strength in the Chinese iron ore market. Among its major partners is Baowu, China\u2019s largest steel producer.<\/p>\n He shook off concerns around the health of China\u2019s building industry, which he said had been brewing for \u201c5, 6, 7 years\u201d and \u201cnever seem to come to reality\u201d.<\/p>\n \u201cI\u2019ve been to those towns that no one lives in. They\u2019ve been around a long, long time,\u201d he said.<\/p>\n \u201cI would be a lot more concerned about the US balance sheet than I would around China\u2019s building industry. <\/p>\n \u201cThe view of the guys from Baowu was that iron ore will probably hover around about where it is, it might move 10 or 15 or 20 bucks a tonne maximum over the next three to four years. <\/p>\n \u201cSo I feel very confident with iron ore and look, we can put it on on a ship for about $26 US a tonne, that gives us a lot of headroom.\u201d<\/p>\n While Onslow will be exporting a product of around 58.5% Fe, Ellison said the emissions savings from higher grade iron ores in the blast furnace process were only \u201cslightly less\u201d.<\/p>\n \u201cWe\u2019re going to be exporting about 58 and a half per cent. A big chunk of the iron ore coming out of the Pilbara now is less than 60%. So I think it\u2019s a pretty solid project.\u201d<\/p>\n MinRes has set a target of ramping up its iron ore exports from under 20Mt to 80-85Mt, replacing its marginal Utah Point and Koolyanobbing operations with Onslow \u2014 where Ellison thinks it could eventually ramp up to 50Mtpa \u2014 and deposits to be developed and exported through shared infrastructure with Hancock Prospecting at Port Hedland\u2019s South West Creek berth.<\/p>\n \u00a0<\/p>\n Scroll or swipe to reveal table. Click headings to sort.<\/em><\/p>\n WordPress Tables Plugin<\/a><\/p>\n \u00a0<\/p>\n While iron ore received a bump from potential Chinese stimulus measures yesterday and news India\u2019s steel consumption had risen 14% YoY, the premium hard coking coal price didn\u2019t play ball, down 3.1% to US$313\/t.<\/p>\n That remains super-strong by historic levels and a massive premium to the US$123\/t price being traded for 6000kcal Newcastle high CV thermal coal.<\/p>\n No wonder Whitehaven (ASX:WHC)<\/a> saw fit to toss a potential $6.4 billion BHP\u2019s (ASX:BHP) way for its Daunia and Blackwater met coal mines in Queensland.<\/p>\n There are a few naysayers though to the deal, due to close in the middle of next year, which will mean 70% of WHC\u2019s revenues will in future come from steelmaking coal.<\/p>\n Bell Rock Capital succeeded in getting shareholders to deliver a strike to its rem report last month at Whitehaven\u2019s AGM. Though they whittle down their stake in the aftermath, with their campaign not successful in preventing WHC from doing the deal, which does not require the support of shareholders.<\/p>\n Meanwhile, a note from the unrelated Bell Potter has cropped up, knocking down Whitehaven\u2019s price target from $7 to $6.50 on balance sheet risks around the transaction.<\/p>\n That runs counter to much of the response from the financial community, and the immediate reaction of shareholders, who pushed Whitehaven\u2019s price significantly higher when the deal was announced.<\/p>\n Whitehaven is rated as undervalued by Morningstar, with consensus rating it a \u2018moderate buy\u2019.<\/p>\n Citi lifted its price target on Whitehaven from $7.84 to $8.45 on the back of the transaction in late October, with earnings per share expected to increase 93% in FY25 to $1.44 on the back of the new assets.<\/p>\n \u00a0<\/p>\n Scroll or swipe to reveal table. Click headings to sort.<\/em><\/p>\n WordPress Tables Plugin<\/a> The post Bulk Buys: Fortescue cops a strike while the iron ore\u2019s hot<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"
\n\u2013 Chris Ellison<\/em><\/div>\nWhat\u2019s keeping the shareholders happy?<\/h2>\n
MinRes confident iron ore expansion will pay off<\/h2>\n
ASX iron ore stocks<\/h2>\n
Did Whitehaven get a raw deal on BHP mines?<\/h2>\n
ASX coal stocks<\/h2>\n
\n<\/span><\/p>\n