Just goes to show the power of a comment by a powerful company doesn't it. With a possible vested interest as well.
There is no coincidence that the jump in shorts coincides with Goldmans coming out on the 19th with a down grade on RIO and Iron Ore. (ironically upgraded Vale)
You have to shake you head though, Goldmansis quite upfront about possibly having a position either side of the market. Which side are they taking though?
Meanwhile the Iron Ore space is in a sector wide panic with share prices at or near GFC levels or lower. All on the back of China wanting more of the stuff they produce, and based on prices being forecast that haven't even happened and may or may not happen. Quiet simple the smaller Iron Ore stocks are being hammered the most and have not trended with the Fe price as RIO and BHP have. FMG is in the middle somewhere.
I think its quite simple really. If AGO or other miners can produce Iron Ore DSO at or near BHP or FMG levels then they will be fine. On the flip side if Iron Ore drops to the levels some predict (80's or lower) then Australia is in deep trouble. None of these analysts incidentally are predicting trouble for Australia which IMO would be a natural flow on from a collapsed sustained Fe price. So why haven't they??
AGO has a model that works up to 12 million tons by road. It Horizon 2 that needs the rail. Worst case scenario it gets stuck at 12 million tons a year. At 12 million tons a year the stock price on earnings at $120 a ton is well north of here.
AGO Price at posting:
$1.09 Sentiment: LT Buy Disclosure: Held
