Cadence: Fortescue in severe financial difficulty

Livewire Exclusive

Livewire Markets

Karl Siegling, the Chairman of Cadence Capital says there are “weird things” happening in the iron ore market at the moment, which is causing producers to lock in losses in the hope of cutting costs or iron ore prices returning to higher levels. “Rio’s in the fortunate position that their cost of production is much lower than Fortescue or Atlas, which is why they will survive. And is one of the reasons why they’d be hopeful that the price goes lower, so that competitors go out of business. But all the time their cash flow just goes down and down and down and down. I think most analysts would say to you that iron ore was 75% of Rio’s earnings last year… and that number is going to shrink dramatically. Imagine 75% of your annual wage just disappearing. You’d be living on 25% of your annual wage. That’s what’s effectively happened to Rio.” Siegling says there’s now a “high chance that Fortescue is in severe financial difficulty” and he outlines the bear case in this video:

Livewire Exclusive brings you exclusive content from a wide range of leading fund managers and investment professionals.

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.