Fortescue Metals (FMG) – The highs and the lows

Chris Garrard

Cadence Capital

Iron ore price has had an amazing rise and fall, a pattern that often repeats itself in commodity cycles. Increased demand initially causes the price of a commodity to increase. Mining then becomes extremely profitable, encouraging more mines to be constructed. The new supply causes the commodity price to fall until the highest cost producers cannot make money and stop producing. BHP, Rio, Vale and Fortescue are the four biggest iron producers globally. Of these, Fortescue has the highest cash costs and the lowest grade of iron ore. The Company is forecasting a significant reduction in cash costs in 2016, but we believe it will still be the highest cost producer of the four big miners. At Cadence we first shorted FMG at $3.84 in September 2014, and have added to the short position a number of times as the FMG share price has fallen. Our latest articles expands on our case to be short FMG: (VIEW LINK)


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Chris Garrard
Portfolio Manager
Cadence Capital

Chris joined Cadence Capital in 2007 as a Portfolio Manager. Chris holds a Bachelor of Commerce, Bachelor of Engineering (Honours) and a Masters of Commerce (Finance) and has over 10 years finance and financial services experience having worked as...

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