Billionaire chairman of Fortescue Metals Group on iron ore, China and why he thinks the miner is worth more.
If there’s anyone that understands the joy and the inevitable pain of the waxing and waning of commodity cycles, it is Andrew Forrest.
Having topped the ranking of Australia’s wealthy in 2008 with an estimated fortune of over AUD9 billion, the billionaire founder and chairman of Fortescue Metals Group has watched his fortune – built on a 30% stake in the world’s fourth largest iron ore miner – shrink to a AUD2 billion as the price of the steel making ingredient has tumbled from a record $180 a tonne in 2011 to around $60 a tonne.
Not that he seems worried about the hit to the hip pocket when Barron’s Asia caught up with the one of Australia’s most colorful business identities on Wednesday. Forrest, who is also known by his nickname “Twiggy”, has a deep appreciation of how fortunate he is, with the mining mogul visiting Hong Kong to promote his anti-global slavery foundation, Walk Free.
“We can’t solve everything, so we’re going after one thing and that’s freedom. All through out Asia and other parts of the world we’re driving for the end of slavery,” he says dressed in a suit but shod in a pair of black R.M. Williams boots, the iconic “bush” brand of footwear favored by Australian farmers and politicians (even Japanese Prime Minister Shinzo Abe wore a pair on a visit to a rival’s iron ore mine last year).
Philanthropy has become a big part of Forrest’s life, with the well-heeled West Australian and his wife Nicola donating money to scholarships at the University of Western Australia and the arts. While enjoying his philanthropy, Forrest is quick to admit that he still enjoys the cut and thrust of the mining business.
“If you talk to my former executive assistant she would say that my day job has been philanthropic and my part time job has been professional, as in chairman of Fortescue. The majority of my time is spent on philanthropy but there is no more fun than business.”
Fun would not be the first word that springs to mind to describe the challenges confronted by Forrest and Fortescue chief executive Nev Power over recent months. The precipitous drop in the iron ore prices has seen Fortescue Metals Group ( FMG.AU ) shares take a beating, as investors zeroed in on the company’s ability to generate the cash flows needed to sustain its leveraged balance sheet.
Concerns about the company’s balance sheet went into overdrive in March when the company pulled a $2.5 billion senior note offering because the 8.5% yield rate demanded by lenders was too demanding, only to unveil a $2.3 billion deal the following month pitched at 10.25%. While the yields were much higher than many expected, it was a price worth paying to push the company’s debt repayments out to 2019.
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