Anton, I'm very much aware of the consensus for the 2017 / 2018 iron ore price.
Macro business and The Dalian commodity exchange, provide a daily update using charts.
I can also tell you how much dirt is being dug up and shipped by the Australian and Brazilian majors.
VALE 400 million tonnes
RIO 360 million tonnes
BHP 280 million tonnes
FMG 160 million tonnes
Stock piles in China now stand at over 110 million tonnes.
Yes the ore market is well supplied.
Why is the price still above it's 2016 low of $40 usd.
Could it be Chinese infrastructure investment?
The closing of high cost polluting Chinese steel mills?
The need for high quality Australian ore?
Could it be all of the above.
About a week previous, I posted on this thread two charts and dialogue about how a combination of technical analysis and fundamental analysis must be used when trading any stock.
https://hotcopper.com.au/posts/21933839/single
I'll say it again, A combination of TECHNICAL and FUNDAMENTAL analysis MUST BE USED.
I'll say it again, A combination of TECHNICAL and FUNDAMENTAL analysis MUST BE USED.
One more time just in case you missed it.
A combination of TECHNICAL and FUNDAMENTAL analysis MUST BE USED.
OK, so lets look at the technical side.
The move from 0.03 to 0.049 two weeks ago was a move of 66%.
A large move when considering the previous 4 weeks trading. Of course some share price weakness was to be anticipated.
As expected, a large red candle appeared six days ago and normally, this would prelude more share price weakness.
However what followed was further consolidation, churn and a gradual move up towards the 0.05 c resistance level again.
What you're are witnessing here is strength in the market.
Ok, lets look at the fundamental side.
It has been stated here by many others and also the company what profit can be expected with an ore price of $70 usd per tonne.
I'll reiterate. AGO has a current production cost approximately of $50 aud per tonne.
Using a margin of $27 per tonne and including the 25% of ore that AGO have hedged, this provides an EBITDA of approx. $350 million aud dollars per year.
Deduct tax and the profit result is approx. $230 million aud per year.
The current market capitalisation without considering the 6 billion options being exercised at 0.075 c is $439 million aud.
This results in a P/E ratio of TWO...!!!!!
Again, this is a PRICE / EARNINGS ratio of TWO....!!!!
So, while we have a stock that is technically over bought and an RSI sitting above 80, the fundamental side provides compelling buying....!!!!!!!!!!
On another note I am note in this to make a profit of $800, or playing with less than $10,000.
I have 5 parcels. I purchased 3 parcels @ 0.02c and a further 2 @ at 0.025c.
Each parcel is a million shares so you can do the math.
As I have stated, I watch the ore price diligently and should there be any prolonged weakness, I'll be closing my position faster than you can say two shakes.
But, until we witness that event, I am going to trade the trade.
Do you know what that means?
It means it is no use banging you head continually against the wall or the desk, claiming the iron ore price is over bought or the ore market is over supplied.
Yes, this may well be true from your perspective but remember markets can remain irrational longer than you can remain solvent.
On a final note the daily chart for the Dalian futures is showing support at 600 yuan.
Cheers Lute
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