A sharp rise in the price of Fortescue Metal Group shares has increased Andrew "Twiggy" Forrest's personal fortune by around half a billion dollars within the space of two days.
Andrew Forrest appears to have already cashed in on the positive karma reaped from his recent, record-breaking act of philanthropy, with prices in Fortescue shares surging 43 cents in the space of just two trading sessions.
As a result of the price spike the value of Forrest’s personal holdings in the iron ore giant increased by $441.136 million to over $5.5 billion in total.
Geoff Saffer, the head of research for Australian Stock Report, imputed the leap in Fortescue share prices to anticipation surrounding the release of a strong production report by the company, which is expected to indicate increased output and healthier margins for the September quarter.
Analysts say Forrest’s recent philanthropic deed, which saw he and wife Nicola donate $65 million to the cause of higher education in Western Australia, would have had an indifferent impact on share prices, pointing instead to changing conditions in the global resources sector and increased optimism amongst iron ore producers – particularly with respect to chief export market China.
At a recent presentation made before the Macquarie Western Australia Forum Jimmy Wilson, BHP Billiton’s President of Iron Ore, cited a forecast of 7.5 per cent expansion per annum in China’s GDP through to 2025, implying annual growth of 3.5 per cent for steel demand during the same period.
Trade data indicates that China’s steel production rates remain highly robust, at levels in excess of 2 million tonnes a day despite the beginning of the third quarter usually suffering from a seasonal dip.
Resurgent demand from China has already pushed spot prices above USD$130 per tonne, which is enough to provide healthy margins.
Australia’s big three iron ore producers, comprised of Rio Tinto, BHP Billiton and Fortescue, have all flagged major expansions in output on the back of these bullish expectations for Middle Kingdom demand.
BHP is forging ahead with the development of new mines whose initial production capacity will be 35 million tonnes a year, bringing total capacity to 220 million tonnes per annum by the end of 2014, while Rio Tinto is expected to announce an expansion in output to 360 million tonnes a year before December.
Fortescue’s expansion of its Kings mine at the Solomon Hub in Western Australia will push the company’s annual output from 120 million tonnes to 155 million tonnes by the end of the year.