Brokers are currently sceptical of shares in S&P/ASX 200 Index (ASX: XJO) iron ore favourite Fortescue Metals Group Limited (ASX: FMG). But the iconic index houses another, potentially more promising, iron ore share.
Champion Iron Ltd (ASX: CIA) has been tipped as one to watch by a major fundie despite expectations the price of iron ore could fall.
The ASX 200 company is developing mining operations in Canada and currently trades at a share price of $4.82.
So, why might the far smaller ASX 200 share be a better buy than Fortescue? Let's take a look.
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Could this ASX 200 share be a better buy than Fortescue?
Janus Henderson Group (ASX: JHG) portfolio manager Tim Gerrard is reportedly bullish on metals and mining, and sustainability.
It's for those reasons he is also hopeful of ASX 200 mining share Champion Iron, Livewire reports. The fundie was quoted as saying the stock offers "plenty of catalysts and deep value", continuing:
[Champion Iron is] producing iron ore in Canada … That iron ore is low carbon, it has a low carbon footprint. There's a lot of hydropower in Canada.
That business is [also] being built off the back of a low capital base … and it can be expanded two or three times and so, even though I know [iron ore] prices might come off, it can be expanded.
But that's not all the fundie likes about the stock.
Gerrard told the masthead the key to his bullishness is the company's work to increase the grade of its iron ore, which could allow it to be used in steel recycling operations in the US. That could then lower the company's carbon footprint further.
Of course, Fortescue has plenty of green plans of its own. The company operates its renewable energy leg, Fortescue Future Industries, and recently committed to a massive decarbonisation push at its Pilbara operations.
While the latest move likely saw climate-conscious investors celebrating, it also raised eyebrows as some brokers queried how the company would fund the $9 billion plan.
Many assume the iron ore giant will reduce its dividends as it works to cut its scope one and two emissions from the region by 2030.
Indeed, most brokers are bearish on the future of the Fortescue share price, with Goldman Sachs tipping a 29% downside.
Shares in the ASX 200 giant are currently trading at $16.73, while the broker expects them to fall to $12.10.
Champion Iron share price snapshot
Shares in Champion Iron and Fortescue have performed similarly so far this year.
Both ASX 200 stocks have slumped around 15% year to date.
Looking longer-term, however, the Fortescue share price has outperformed, gaining 13% over the last 12 months. Meanwhile, that of Champion Iron has risen just 2%.
For context, the ASX 200 has fallen 14% since the start of 2022 and 9% since this time last year.
