CFA Society Singapore
SINGAPORE (Mar 25): UOB KayHian says upcoming market entrant Fortress Minerals (FMIL SP) is well positioned to ride on increasing demand from Chinese steel mills.
Fortress Minerals is a 37%-owned associate of Malaysia-listed Selangor Dredging Bhd, an investment firm with property development businesses in Malaysia and Singapore.
The company produces high-grade iron ore concentrate mined from its Bukit Besi mine at Terrangganu, Malaysia, with an estimated output capacity of 40,000 wet metric tonnes per month.
In unrated report on Monday, UOB says it sees healthy prospects for the company in China, where structural reforms to address pollution and inefficient steel mills will drive demand for high-grade iron ore to Fortress Minerals’ advantage.
The subsequent roll-out of China’s One Belt, One Road infrastructure initiative will further spur continued demand for iron ore concentrates, it adds.
In particular, UOB highlights SRK Consulting’s valuation of Fortress Minerals’ Bukit Besi mine at US$32 million in the base case.
“There is substantial exploration potential within the mine, as only 4.71% of the mining areas has been explored. In addition, Fortress Minerals’ mining rights are valid up till early-2033,” notes the research house.
Potential downside risks to UOB’s view include regulatory risks; the early termination of the group’s mining rights; non-renewal or extension of mining leases; lower-than-expected availability of mining resources; and shareholders’ loans that will come due.
Fortress Minerals lodged its initial public offering (IPO) prospectus on Feb 28, and is due to commence trading on the Catalist board of the Singapore Exchange (SGX) on Wednesday.