Another 5.6% has been wiped from the market value of Fortescue Metals Group Limited (ASX: FMG) today after the iron ore price retreated further overnight.
Fortescue, which is a pure iron ore play, has seen its shares crumble over the last 12 months as a result of the unexpectedly violent downturn in the commodity's price. With the price of iron ore having halved since the beginning of 2014 to be changing hands for roughly US$67 a tonne, Fortescue's shares have crumbled an agonising 65% to be trading at just $2.19 – their lowest price since early 2009.
Although it is Australia's third largest iron ore miner, it has been hit harder than its two larger rivals, BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO), as a result of its lower quality ore, higher production costs and heavier debt load.
While now might seem like a compelling time to buy, investors need to be aware that iron ore prices are expected to fall even further over the course of the year, which will put even more pressure on Fortescue's ability to pay down debts and continue paying dividends.
Instead of taking an unnecessarily high level of risk on Fortescue, there are plenty of other great ASX stocks which are also trading at compelling prices.
