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Iron ore miners set to profit from shutdown exemption

Fortescue Metals chairman and major shareholder Andrew Forrest has recouped a small part of his more than $1 billion loss from the initial crash in the value of the iron ore miner’s shares with some well-timed purchases.

Mr Forrest spent more than $35 million in buying 4 million shares at an average price of $8.79.

Fortescue stock was on Thursday trading about 25 per cent up at $10.69 after the company reaffirmed export guidance this week and news emerged that major overseas competitors may curtail production amid the coronavirus outbreak.

The stock hit a year high of $12.69 on January 22 off the back of strong iron ore prices.

The iron ore giant said shipments from Port Hedland remained in line with its 2020 guidance, and it expected no delays to the company’s Iron Bridge and Eliwana growth projects either.

Macquarie analysts suggest that mine closures in Canada and South Africa due to the coronavirus outbreak may boost Australian iron ore miners like Fortescue, which has escaped the strict shutdown rules placed across much of the rest of the economy amid the coronavirus outbreak.

“Attempts to contain the COVID-19 virus has seen certain jurisdictions place restrictions on mining activities, with South Africa and parts of Canada recently announcing such directives,” the analysts wrote.

“[But] Australian operations continue to produce at normal levels.”

Fortescue said the majority of its workforce is based in Western Australia but they wouldn’t be hit by the travel ban and self-quarantine provisions, which has exemptions for mining industry workers.

The miner said it would use a variety of measures including charter flights from eastern Australia to ensure that site-critical functions aren’t impacted.

While Rio Tinto, Australia’s biggest iron ore producer, and fellow majors BHP Group and Fortescue Metals Group have yet to curtail operations in Western Australia, there may come a time when the coronavirus forces their hands.
Source: Australian Financial Review

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