2009 Media Releases

July 10, 2009

Deutsche Bank initiates coverage of Fortescue Metals

Deutsche Bank has initiated coverage of iron ore production company Fortescue Metals (ASX: FMG) with a Sell recommendation.

Research analyst Peter O’Connor initiated coverage with an AUD2.51 twelve month price target.

Mr O’Connor said "FMG has established itself as the number 3 player in the Australian iron ore industry and number 5 globally. This is a remarkable feat reflecting the focus and drive of the management team, especially as FMG only kicked off iron ore production in May 2008. However FMG now needs to deliver returns commensurate with this status."

According to Deutsche Bank, FMG is strategically well positioned in the iron ore corporate landscape as an emerging alternative to incumbent iron ore players. Deutsche Bank’s rating is very much a reflection that the share price is trading ahead both of comparable company multiples and also a 42% premium to NPV. While Mr O’Connor expects FMG to “grow” into the current share price, it will take approximately two years to achieve this.

Mr O’Connor believes there are growth options abound for FMG, subject to debt and iron ore market conditions. “It has an impressive potential growth pipeline with resources over 5 billion tonnes. However ongoing challenges for the company include a reorganisation of capital structure to optimise funding and operational issues, especially the medium term operational expenditure,” he said.

Fortescue Metals is engaged in the production, development, and exploration for iron ore in the Pilbara region of Western Australia. The company focuses on the Chinese markets.

For further information, please contact:

Michelle Chaperon (02) 8258 1311



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