Along with its partners, Fortescue Metals has approved the US$2.6bn Iron Bridge magnetite project. The company will fund its share through a combination of project debt and operating cash flow.
Citi assesses the returns are modest but the project does provide broader blending opportunities for Fortescue Metals.
While the shares have had a spectacular run in 2019, Citi believes valuation levels are reasonable in the context of a possible US$60/t long-term iron ore price.
Neutral rating maintained. Target rises to $7.20 from $6.50.
Sector: Materials.
Target price is $7.20.Current Price is $7.84. Difference: ($0.64) – (brackets indicate current price is over target). If FMG meets the Citi target it will return approximately -9% (excluding dividends, fees and charges – negative figures indicate an expected loss).
