Andrew ‘Twiggy’ Forrest knows better than most how movements in commodity prices can cause havoc with your bank balance. With iron ore prices falling to its lowest in close to a year, shares in Fortescue Metals Group tumbled 8.38 per cent to $4.98 in initial trade on Monday morning, wiping around $500 million off the value of Forrest’s stake.
Since February 21, when FMG’s shares broke through $6 for the first time since early 2012, the stock has dropped by almost 15 per cent, broadly in line with the fall in the iron ore price. That drop has wiped around $1.3 billion off the value of Forrest’s stake in a matter of 11 trading days. His stake is now worth $5.1 billion.
Calculating the impact of the iron ore price movement on other iron ore moguls such as Gina Rinehart and Angela Bennett isn’t as transparent, although given they both rely on royalties paid by Rio Tinto – which mines tenements owned by their fathers, Lang Hancock and Peter Wright – the share price of that company can be seen as a very rough proxy.
In morning trade, Rio shares dipped 4.23 per cent to $62.19. Since February 21, Rio’s stock is down 11.4 per cent. BHP Billiton shares lost 3.15 per cent this morning, to $36.53. The stock is down 6.7 per cent since February 21.
Fortune seesaws
Forrest has regularly felt the impact of the iron ore prices on his wealth. In 2008, with iron ore spot prices soaring towards $US200 a tonne, share in FMG jumped and Twiggy’s fortune soared to $9.4 billion, making him Australia’s richest person. A year later, with the spot price back around $US60, Twiggy’s fortune was put at $2.4 billion as FMG shares slumped.
With the iron ore price dropping 2 per cent to $US114.20 a tonne – the lowest price since June 2013 – on the back of more disappointing data from China, Forrest appears to have taken a step back onto that wealth rollercoaster.
The drop in the iron ore price is certainly causing jitters at all ends of the mining sector; last week Citi downgraded its long-term earnings expectations for BHP Billiton and Rio Tinto. FMG and Atlas Iron Ore were also downgraded.
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