Where is the "massive pile of debt"? debt equity ratio = 1.20; net debt / equity = 1

(Cash+Mkt Sec)/Debt ratio computed by me for Fortescue is the same as for BHP and higher than VALE's one.

-"Its peers BHP Billiton, Rio Tinto and Vale can withstand the downturn for the long-term, due in part to their strong balance sheets".

Fortescue's Altman Z-score (as computed by me; I use Total Equity instead of Retained Earnings into the formula) is higher than Vale's one (respectively 1.7 against 1.6).

Fortescue's EBITDA Margin is the same as for VALE.

Where are strong balance sheets at least in the VALE case?]]>

Where is the "massive pile of debt"? debt equity ratio = 1.20; net debt / equity = 1

(Cash+Mkt Sec)/Debt ratio computed by me for Fortescue is the same as for BHP and higher than VALE's one.

-"Its peers BHP Billiton, Rio Tinto and Vale can withstand the downturn for the long-term, due in part to their strong balance sheets".

Fortescue's Altman Z-score (as computed by me; I use Total Equity instead of Retained Earnings into the formula) is higher than Vale's one (respectively 1.7 against 1.6).

Fortescue's EBITDA Margin is the same as for VALE.

Where are strong balance sheets at least in the VALE case?]]>

$13286(ttm OCF)-$11764(ttm CAPEX)=$1,522 FCF

*pg.9, **pg.18: http://bit.ly/1yA4AXh

***pg.11, ****pg.36: http://bit.ly/1yA4D5o]]>

$13286(ttm OCF)-$11764(ttm CAPEX)=$1,522 FCF

*pg.9, **pg.18: http://bit.ly/1yA4AXh

***pg.11, ****pg.36: http://bit.ly/1yA4D5o]]>

Let's keep your 8.91% cost of capital computed for this company and assume a 2% long term perpetuity organic growth of the free cash flows (FCF).

In a DCF model, with $1.52 B of twelve trailing months FCF as a starting point, taking into account a total estimated value of operating leases and unfunded retirement and post retirement obligations equal to roughly $2 B, a 16.2% annual FCF growth for the next 10 years would be needed to justify the current (Nov 25 2014) market price. Even if said rate is not so far from historic long term CAGR of the operating cash flows, during last few years the operating cash flows have contracted strongly. That's why I have no positions in Vale and no plan to initiate any positions in the near future.

I wrote this comment myself, and it expresses my own opinion. I am not receiving compensation for it. I have no business relationship with Vale.]]>

Let's keep your 8.91% cost of capital computed for this company and assume a 2% long term perpetuity organic growth of the free cash flows (FCF).

In a DCF model, with $1.52 B of twelve trailing months FCF as a starting point, taking into account a total estimated value of operating leases and unfunded retirement and post retirement obligations equal to roughly $2 B, a 16.2% annual FCF growth for the next 10 years would be needed to justify the current (Nov 25 2014) market price. Even if said rate is not so far from historic long term CAGR of the operating cash flows, during last few years the operating cash flows have contracted strongly. That's why I have no positions in Vale and no plan to initiate any positions in the near future.

I wrote this comment myself, and it expresses my own opinion. I am not receiving compensation for it. I have no business relationship with Vale.]]>

I appreciate your model and thoughts. Just let me point out some remarks (in brackets).

It looks like the following assumptions, among the others, were included into the model:

1) an effective tax rate equal to a statutory tax rate of 35%. (During FY2013 the Company realized a $71M net loss before taxes and paid $257K of Income taxes - from Consolidated Statements of Cash Flows.)

2) a 14.75% cost of debt (through the computation of a synthetic rating of D2/D for a company with a 0% probability of failure as assumed in the article. During FY2013 the Company paid $9.04M Interest - from Consolidated Statements of Cash Flows - with an average total debt of $536.45M for the years 2013 and 2012).

3) a 30% standard deviation on stock price to compute the value of stock options. (The Hist. volatility 180 should be currently around 65.25%. The $101.9M aggregate intrinsic value of RSUs outstanding as of December 31, 2013 may be also considered as further addition to the total value of options.)

4) a $341.17M of NOL carried forward from prior years. (In the last 10-K they say: "Liquidity and Capital Resources - Since inception and through the year ended December 31, 2013, we had accumulated net operating losses of $1.14 billion...".)

Based on 1) -0.37% instead of 35%, 2) 1.69% instead of 14.75%, 3) 65.25% instead of 30% , 4) $1.14B instead of $341.17M and with an ERP based on "Operating regions" instead of "Country of incorporation" (which means 5.30% instead of 5%) the model leads to a price 11.1% higher than $99.85.

Your comments are welcomed.]]>

I appreciate your model and thoughts. Just let me point out some remarks (in brackets).

It looks like the following assumptions, among the others, were included into the model:

1) an effective tax rate equal to a statutory tax rate of 35%. (During FY2013 the Company realized a $71M net loss before taxes and paid $257K of Income taxes - from Consolidated Statements of Cash Flows.)

2) a 14.75% cost of debt (through the computation of a synthetic rating of D2/D for a company with a 0% probability of failure as assumed in the article. During FY2013 the Company paid $9.04M Interest - from Consolidated Statements of Cash Flows - with an average total debt of $536.45M for the years 2013 and 2012).

3) a 30% standard deviation on stock price to compute the value of stock options. (The Hist. volatility 180 should be currently around 65.25%. The $101.9M aggregate intrinsic value of RSUs outstanding as of December 31, 2013 may be also considered as further addition to the total value of options.)

4) a $341.17M of NOL carried forward from prior years. (In the last 10-K they say: "Liquidity and Capital Resources - Since inception and through the year ended December 31, 2013, we had accumulated net operating losses of $1.14 billion...".)

Based on 1) -0.37% instead of 35%, 2) 1.69% instead of 14.75%, 3) 65.25% instead of 30% , 4) $1.14B instead of $341.17M and with an ERP based on "Operating regions" instead of "Country of incorporation" (which means 5.30% instead of 5%) the model leads to a price 11.1% higher than $99.85.

Your comments are welcomed.]]>