Newcrest has seen its share price fall 42% since early February 2013, after a string of downgrades, operational issues and the falling gold price. With a market cap of around $10.4 billion, Newcrest has been overtaken by Fortescue, which now sports a market cap of $10.7 billion. Incidentally, Newcrest’s current market cap is only slightly more than it paid for Lihir Gold ($9.5 billion) back in 2010.
Still, Fortescue hasn’t had it all its own way, with the share price losing more than 29% since February 8. BHP Billiton (ASX:BHP) and Rio Tinto Limited (ASX:RIO) lead the way, well out in front, with $100 billion plus market caps.
How long Fortescue can hold onto that mark is uncertain. As we wrote yesterday, the head of China’s largest listed steel maker says there will shortly be an oversupply of iron ore, which may put pressure on Fortescue’s earnings, and put its expansion plans at jeopardy.
Fortescue is in the process of trying to sell a minority stake in its Pilbara infrastructure assets, including railways, port and operations, with the proceeds used to pay down its US$12.6 billion of debt. While the majority of the debt is not due for repayment until 2017, the company faces hefty ongoing interest costs.
Fortescue could also raise more funds if it comes to an agreement with Brockman Mining to allow Brockman to ship 20 million tonnes of ore along its tracks from late 2016. A number of other junior iron ore miners have also applied to the regulator for access to the infrastructure.
Newcrest’s glory days may be behind it, so the gold miner is unlikely to challenge Fortescue for the title of ‘3rd largest listed ASX resource stock’ anytime soon. But, with iron ore prices almost certain to fall in future, it remains to be seen how long Fortescue can hang on to the title.
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Motley Fool writer/analyst Mike King owns shares in BHP.