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Published 06 September 2012 05:00, Updated 07 September 2012 13:44
The rich often buy when others are selling. Fortescue Metals Group is out of favour with many investors but during the past three months its chairman, Andrew Forrest, has spent about $175 million on Fortescue stock.
The listed mining company has been hit hard by the falling iron ore share price. Slowing demand has pushed the iron ore price 30 per cent lower over the past three months to $US88 a tonne at the start of September.
Iron ore is used to make steel and concern that China already has enough steel to satisfy its slowing demand has contributed to the price fall.
The decline has brought into question Fortescue’s planned $9 billion expansion at its Pilbara mine site in Western Australia.
Fortescue will be hoping that the purchases by Forrest will give other investors some confidence in its ability to grow.
Like Forrest, Fortescue chief executive Nev Power is optimistic about the iron ore market. He said last week that he expected the iron ore price to rebound to about $US120 a tonne.
The estimate of Forrest’s wealth for the May edition of the BRW Rich 200 was based on a Fortescue share price of $5.92. It hasn’t been as high since.
The closing price on August 31, $3.54 a share, suggests that Forrest’s wealth has fallen to $3.62 billion, or by more than $2 billion, since May.
But don’t feel too sorry for Forrest. The amount he spent on Fortescue stock in recent weeks ($175 million) is almost enough to get entry on the Rich 200 of itself. (The cut-off for this year’s list was $210 million but may be lower next year given the general downturn in the market.)