The Fortescue Metals Group Limited (ASX: FMG) share price hit a record high of $5.81 today and is now up 21% in the past week on the back of a surging iron ore price.
Tragically the iron ore price is only rising because of last week's iron ore mining disaster in Brazil at a mine operated by Vale S.A. that has resulted in the deaths of at least 63 people.
This is the second fatal mining disaster in Brazil in three years and it's likely the government will impose heavy new regulations on iron ore miners in Brazil, while executives at Vale S.A. now potentially face criminal prosecutions and jail time.
All this means the world's second-largest supplier of iron ore in Brazil may be in for a supply slowdown, which is sending the iron ore price higher.
Fortescue itself managed to buy back A$139.2 million worth of its own shares at an average price of $4 over the quarter ending December 31 2018. This is an increasingly shrew looking piece of capital allocation given shares now sell for around 40% more.
It still has a significant amount of debt that is a key risk for investors in the event of a serious China-driven downturn, but it does have a cash balance of US$962 million to help fund a production ramp up if Brazil's supply falls further than expected.
