The Fortescue Metals Group Limited (ASX: FMG) share price fell 4.6% to $4.52 today at around a six-month low as the iron ore price continues to drift lower. According to the Metal Bulletin iron ore currently sells for around US$56.40 a tonne which is around one quarter lower than prices being achieved at the start of 2017.
Fortescue shares remain volatile as it is largely a company built in debt with gross debt of US$4.3 billion as at March 31 2017 and cash on hand of US$1.5 billion. This means net debt stands at US$2.8 billion and the company is still vulnerable to another leg down in the iron ore price on the back of Chinese economic growth drastically slowing for example.
China's central government is reported to be planning on building another 152,000km of new roads and over 50 new airports alone between 2016 to 2020, although any macro-economic downturn could put the skids under these plans.
The miner made a US$1.7 billion profit before income tax for the six-month period ending December 31 2016 and Fortescue looks like it could be the only Australian company to successfully leverage the Chinese construction super-cycle to the benefit of investors.
