a couple of articles

http://www.heraldsun.com.au/business/in-the-black/the-predicted-iron-ore-price-plunge-might-be-overdone/story-e6frfinf-1226591111472

The predicted iron ore price plunge might be overdone
• by: John Beveridge
• From: Herald Sun
• March 06, 2013 12:00AM
Iron-ore stocks have been hit quite hard in recent months as investors factor in a significant fall in iron prices. Source: AFP
INTEREST rates are staying put for now, but the same can't be said of iron-ore prices.
Proving once and for all that the share market always looks far into the future, iron-ore stocks have been hit quite hard in recent months as investors factor in a significant fall in iron prices even as those prices continue to hover healthily above $US150 a tonne.
There is a broad consensus that they won't hang on to that level for much longer with some of the uber-pessimists predicting iron prices will fall as low as $US60 a tonne with the majority of the analyst herd guessing the price will remain above the $US110-a-tonne mark.
The reasons given for the price drop include Chinese stockpiles finally reaching healthy levels in the second half of this year at the same time as extra supplies from Australia and Brazil come on tap.
Tighter Chinese controls on property speculation are also cited as a drag on iron-ore prices because they will slow down construction, which uses a lot of steel.
That is all very well, but it doesn't take account of two things: the fact that China still plans to grow at a healthy clip of 7.5 per cent, which should soak up some of the increased volumes available and the very healthy margins on existing iron-ore exports.
Our two iron-ore giants, BHP Billiton and Rio Tinto, make significant money on iron ore even if prices fall below $US100 a tonne, although it is obvious that the extra volume they ship wouldn't make up for the loss of profits.
Both giants are trading back at December prices and have significantly underperformed the wider share market so if iron-ore prices average about $US120 in the second half of this year, they appear oversold.
Rio Tinto is the obvious buy for those who think the predicted iron-ore price fall has been overdone, because of its much greater reliance on iron ore and its efficient Pilbara mines and railways.
The one big cloud on Rio's horizon is the continued negotiations with the Mongolian Government over the giant Oyu Tolgoi copper mine, with an escalation of that dispute capable of pushing Rio's share price lower.
The picture gets more opaque as you work your way through the smaller players with Andrew "Twiggy" Forrest's Fortescue Metals offering significantly more leverage to a rosier-than-expected iron-ore price outlook, but also has thinner profit margins should the China bears be proved right and iron-ore prices move lower for longer.
Fortescue moves to a speculative buy at current prices, with a proviso that a tight stop loss would be a capital (saving) idea.
Moving further down the ranks of the iron-ore producers, BC Iron's share price is unique in holding up higher than the pack despite all of the negativity.
The reason is that its deal with Fortescue to increase its stake in their Nullagine joint venture to 75 per cent was welcomed by the market.
BC's underlying first-half profit after tax of $13.3 million, excluding the transaction costs, was not bad considering that iron-ore prices reached a low of about US$87 a tonne in September last year, dragging average prices down.
The second half of 2012-13 should be stronger for BC now that it has overcome problems with its crusher which will boost volumes.
Average prices will - in all likelihood - be higher given the recent firmer prices.
The acid test will be what happens after June when the entire industry believes iron prices will be falling, but BC Iron is a buy because the reality should be less dramatic than forecast.
Of the other smaller producers, Atlas Iron and Mt Gibson Iron are both relatively cheap.
But it is hard to get further than a hold, given the risks and the entire iron-exploration sector is perhaps best avoided for now because of the struggle to finance projects amid the current uncertainty around iron-ore prices and demand.
The Herald Sun accepts no responsibility for stock recommendations. Readers should contact a licensed financial adviser.