Fortescue Dismisses More Media Speculation Regarding Asset Sale

Interesting news hit the iron ore space on Wednesday when Fortescue Metals Group (ASX:FMG) shot down media speculation regarding a potential asset sale.
Fresh suspicion about a sale was likely caused by an uptick in the company’s share price — Fortescue had the second-best performance on the S&P/ASX 200 index (INDEXASX:XJO) on Tuesday, rising 5.9 percent to hit AU$1.97. The company’s share price saw further gains on Wednesday, increasing by 6.33 percent to close at AU$2.10.
Nevertheless, the company continues to deny an asset sale is underway. “As previously reported, whilst there is no imperative, Fortescue is open to commercial discussions in relation to a minority interest in its mining assets with interested parties. Fortescue’s position is unchanged, there is no agreement of such nature with any party at this time,” Fortescue said Wednesday in a release.
This isn’t the first time the company has faced such speculation. In August, the Australian iron ore company was hit with similar rumors, also swiftly dismissing them.

Even so, it’s not surprising that iron ore market watchers suspect Fortescue’s share price rise may mean news is in the cards. After all, the company saw its net profit drop by 88 percent in 2014, to US$316 million — that’s compared to $2.7 billion the previous year. What’s more, the company’s share price has steadily decreased each month in 2015, and is down over 25 percent year-to-date.
Those involved in the iron ore space thus might do well to watch the company. Fortescue has emphasized that it is open to discussions regarding interest in its mining assets, and has said it is “aware of its continuous disclosure obligations to the ASX and the ongoing commitment to update the market, if and when, there are matters to disclose.”

Company news

Aside from the excitement surrounding Fortescue, there’s been little news in the iron ore space this week. One other noteworthy even was NMDC’s (NSE:NMDC) announcement on Monday. The Indian company is seeking help from the federal government to secure new reserves in order to scale up its operations.
The company told Mining Weekly that iron ore imports into the country are rising as local steel companies prefer to source raw materials from overseas miners like BHP Billiton (ASX:BHP,NYSE:BHP,LSE:BLT), Vale (NYSE:VALE) and Rio Tinto (ASX:RIO,NYSE:RIO,LSE:RIO). To help bring back demand for domestic iron ore, NMDC is looking to the government to increase the number of operational mines in India — it believes a higher volume of production would allow it to match foreign prices.
According to The Economic Times, NMDC saw its sales drop by 17 percent to 13.11 million tonnes (MT) between April to September, mainly due to the low steel demand. The company’s production was also down in the first half of 2015, dropping 14.3 percent, from 14.44 MT to 12.37 MT.

 
Securities Disclosure: I, Kristen Moran, hold no direct investment interest in any company mentioned in this article. 
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