Iron ore juniors revel in spot price rise 12 January 2010 | by Michael Mills
The share prices of junior iron ore miners have risen strongly in recent weeks thanks to the dramatic rise of the iron ore spot price to a high of US$131.20 per dry metric tonne.
The prices have ballooned in the last month from below US$100 per tonne, thanks to a drastic rise in material intake from steel mills.
The share prices of Fortescue Metals, Atlas Iron and Brockman Resources opened today at $5.30, $2.31 and $2.82 respectively.
These prices have been companies' highest in the past 15 months.
Fosters Stockbroking analyst Michael Evans told MINING DAILY it was difficult to predict how long this trend would continue.
"China is still rebounding and the iron ore market is still tight, so it could continue for some time," he said.
"Many of these juniors are also coming off a low bases."
However, Evans said it was likely the spot price will settle somewhere around its current levels.
"I do not think it will go too much higher if at all," he said.
"However, once the spot price does settle, I think the share prices of many juniors could continue to rise.
"A lot of the companies on the rise at the moment are not actually in production yet, so companies like Brockman Resources, Iron Ore Holdings and FerrAus could go higher."
Evans also believes the days of benchmark price contract negotiations are numbered.
"I do not think there is any reason why iron ore cannot move to spot market like a lot of other commodities," he said.
"Obviously it is not a homogenous commodity like gold or copper, but there a large spot markets in coal and other bulk commodities.
"Despite the fact that spot markets are more volatile, they still seem to work for most participants."
Regardless of whether contract prices are abandoned, Evans expects the share prices of juniors will continue to rise in the medium term.
BRM Price at posting:
$2.75 Sentiment: Buy Disclosure: Held
