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Ah yes, it’s a stampede! From Craig James:
CBA analysts recently downgraded iron ore price forecasts for 2014/15 to US$98 per tonne from US$114/t and calendar year 2015 to US$100/t from US$109/t.
Rio Tinto remains CBA’s preferred exposure in the sector on valuation grounds. Rio Tinto is trading at 9.8 times calendar year 2015 earnings, compared to BHP at 14.0 times 2014/15 earnings.
On the new iron ore price forecasts, CBA believes that Fortescue will not pay down enough debt in 2014/15 to bring gearing below 40 per cent. “The combination of high operating and financial leverage leaves FMG exposed
to downside shocks on the iron ore price.”
Didn’t see the original but baaaaaaaa nonetheless (apologies to Terry McCrann for my pomposity!).
About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
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