Why the Fortescue Metals share price is up 85% in 2019

The Fortescue Metals Group Limited (ASX:FMG) share price is up 85% this year following another solid gain on Tuesday…

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The Fortescue Metals Group Limited (ASX: FMG) share price has been a strong performer once again on Tuesday.

In morning trade the low-cost iron ore producer's shares are up 3.5% to $7.69.

This gain means the Fortescue share price is now up an incredible 85% since the start of the year.

Why is the Fortescue share price charging higher today?

One catalyst for this share price rise was another increase in iron ore prices overnight.

According to Metal Bulletin, the spot price for benchmark 62% fines climbed a further 2.2% to US$88.69 a tonne, putting it within touching distance of the multi-year high of US$90.58 a tonne it reached in February.

The lower grade ore, which Fortescue produces, rose at an even quicker pace. The price of 58% fines climbed 2.4% to US$73.86 a tonne. This is a five-year high and a major reason why Fortescue's shares are up 85% in 2019.

Another catalyst for today's share price gain could be an announcement this morning that its subsidiary FMG Magnetite and joint venture partner Formosa Steel have approved the development of Stage 2 of the Iron Bridge Magnetite Project.

Fortescue's chief executive officer, Elizabeth Gaines, said, "The Iron Bridge Project holds Australia's largest JORC compliant magnetite resource supporting a long mine life. We are confident this project will deliver growth in earnings and cashflow, resulting in enhanced returns to our shareholders and our joint venture partners through all market cycles."

She added: "The Iron Bridge Project will deliver a premium product with iron content of 67%, further enhancing the range of products available to our customers through our flexible integrated operations and marketing strategy. When combined with the Eliwana development, it will increase Fortescue's average product grade and provide the ability to deliver the majority of our products at greater than 60% Fe, consistent with our long term goal."

Should you invest?

If you believe that supply constraints are going to lead to iron ore prices climbing even higher from here then Fortescue could be worth considering.

But if you're like me and not convinced this will be the case, then I would suggest you consider a diversified miner that has exposure to iron ore such as BHP Group Ltd (ASX: BHP) or Rio Tinto Limited (ASX: RIO) instead.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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