In what has started off as another dreadful day for the local sharemarket, Fortescue Metals Group Limited (ASX: FMG) shares have slipped to their lowest price in more than six years.
Fortescue Metals Group is Australia's third largest iron ore miner and the fourth largest in the world, behind Rio Tinto Limited (ASX: RIO), BHP Billiton Limited (ASX: BHP) and Brazil's Vale. Unfortunately, it does not enjoy the same low cost operations nor the high-quality ore as its larger rivals while it also carries a mountain of debt, making it somewhat more susceptible to a fall in the commodity's price.
According to figures provided by the Metal Bulletin Ltd, iron ore slipped 0.7% in its latest session to trade at US$55.26 per tonne, down from a recent high of roughly US$65 a tonne.
The problem is analysts are becoming increasingly bearish regarding the commodity's future with some even expecting it to fall below US$40 a tonne by the end of the year. That would prove disastrous for the nation's higher cost operators, including Fortescue.
The stock fell 4.3% to just $1.742 (compared to a previous low of $1.75), which compares to a 1.8% smashing for the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO). Fortescue's shares have now fallen 63% over the last 12 months and 9.7% over the last week.
Although to some investors it might look 'cheap' at its current price, there's nothing stopping it from falling even further. Indeed, even despite the massive loss over the last 12 months, it's still possible for investors to lose 100% of their investment from today's price. Given the strong headwinds facing the sector, investors would be wise to avoid Fortescue altogether.
