What’s happened to the Fortescue share price?
Shares of Fortescue Metals Group [ASX:FMG] have jumped almost 14% in the past month, moving closer to the crucial $7 mark.
Any move above $7.50 would signal the highest point in nine years.
Why have Fortescue shares done this?
Predictably it was all to do with China and the iron ore price. The price of iron ore has surged to US$76 a tonne over the past seven weeks. An astonishing 36% rise in a little under two months.
The main driver seems to be signs that China’s construction boom is very much alive and well.
Caterpillar’s [NYSE:CAT] second quarter results surprised analysts to the upside in late July. The company cited a steady recovery in China. Given the distrust of official statistics, Caterpillar acts as a good bellwether for the state of Chinese growth.
It’s early days, but if the iron ore price run continues then the Fortescue share price could start to attack the key $7 resistance level.
What now for Fortescue?
Fortescue had almost been written off 18 short months ago, with low iron ore prices and high debts threatening the very existence of the company.
But management have skilfully handled the situation, refinancing and extending out loan terms, and the share price has risen 300% in response. A bumper $1.2 billion half year result in December and lower production costs has even seen Fortescue start to use their positive cash-flow to retire debt.
A remarkable turnaround.
If the iron ore price continues to move north the leaner and more efficient Fortescue could stand to be a big beneficiary.
Analyst, Money Morning
PS: My colleague Jason Stevenson spends each day hunting down the best opportunities across the whole mining and resources sector. You can check out his top 10 mining stocks for 2017 report here.