The 55c rise in the share price of Fortescue Metals to $18.05 yesterday was one of the more bizarre market reactions to a story about human tragedy, stakeholder risk and regulatory uncertainty.
Cyclone George devastated Fortescue’s rail camp, killed two workers, damaged its reputation and put a halt to production yet the market thinks the company is worth about $150 million more.
Having digested today’s press, investors have a more sanguine view this morning and the stock has retraced 45c to $17.60.
The Australian easily had the best coverage on Fortescue today and it sounds like the company blundered in not evacuating its workers and faces a major backlash for not securing its dongas to the ground with steel cables.
The ever-confident CEO and controlling shareholder Andrew “Twiggy” Forrest is quoted claiming that construction will resume in less than a month. Maybe he hasn’t yet twigged that Burke & Grill can no longer pull the strings that came
from doing fundraisers for AWU boss Bill Shorten and having compliant ministers like John Bowler regulating the mining industry.
The unions are calling for blood and the old Pilbara demarcation battles between the CFMEU and the AWU will perhaps see something of an auction in terms of the toughness of the reaction.
Worksafe, the cops and the coroners office will also be crawling all over the company but Twiggy’s response is to suggest the workers up stumps and start building from the other end of the $1.9 billion rail line near Port Hedland.
Twiggy’s Fortescue shareholding is still worth $1.79 billion today and the company is capitalised at $4.5 billion so there’s plenty of value around that can be outlaid on safer work practices.
However, a major delay would obviously prevent those ships heading to China with the claimed 45 million tonnes of ore that will be plucked annually from the Chichester Ranges.
The paper billionaire has a lot on his plate at the moment, including proceedings brought by ASIC which is seeking fines of $3.6 million for allegedly defective market disclosures.
It will be interesting to see who he turns to this time now that one of his original spruikers, Rodney Adler, is in jail and his favourite lobbyists are persona non grata in political circles and media circles.