Not sure why people pay so much attention to short term factors like debt, cash, etc.
I prefer to play the theme.
If you look at the history of iron ore in Australia you'll see a common theme. During the boom periods a bunch of new miners pop up. Then when the downturn inevitably comes, the iron ore oligopoly pushes the price down. The new miners can't compete with the efficient mines in the Pilbara and so can't match the price levels offered by the oligopoly. They go bust. Then the likes BHP and RIO pick up the customers formerly held by the defunct miner.
The few remaining surivors barely eek out a living on the low iron ore prices and eventually get taken out by a low ball bid by an oligopoly player. See what happened to North Limited.
That's how RIO and BHP steadily grow their market shares. Look at how little iron ore RIO produced in 1990 and look at it today.
It's ruthless but that's how the game works. This isn't the first resources boom we've ever had, we've had them before, and it's NOT a coincidence that by the end of the last boom (during much of the 90's) the only listed iron ore companies were BHP and RIO. (Portman didn't really get into the game until the late 90's, and even then kept a low profile/low volumes to avoid upsetting the oligopoly and end up being throttled by them).
All this sounds far fetched? Talk of an evil conspiracing oligopoly? Maybe it is, but that's my personal reading of the events of the past.
FMG Price at posting:
$1.72 Sentiment: None Disclosure: Not Held
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