Iron ore stocks on the road to recoveryPrint The Dirt: Robin...

Iron ore stocks on the road to recovery

Print The Dirt: Robin Bromby | July 17, 2009
Article from: The Australian
IRON ore share prices have, in the past six months, recovered much of their 2008 losses and have strongly outperformed equity markets, says Sydney-based Resource Capital Research in a report out today.

“Money is flowing into the junior end of iron ore share markets,” the report continues.

RCR is following a basket of iron ore stocks and these have gained an average of 52 per cent in the past three months.

It argues that the emergence of companies like Fortescue Metals Group and Atlas Iron has shown it’s possible for new players to emerge and compete with established producers.

The report says that junior players will be given a boost by increasing demand for steel in the BRIC (Brazil, Russia, India and China) countries, and these companies will be able to carve out a share of the market for themselves.

Apart from the two aforementioned companies, RCR’s report shows that – of the companies it covers – the most advanced is BC Iron which could be in production at Nullagine by mid-2010.

In the next rung there is Sundance Resources, which is at the feasibility study stage of its Cameroon project, and Venture Minerals which has released a scoping study for its Mt Lindsay project in Tasmania.

Meanwhile, Bloomberg is reporting that Aurox Resources is in talks with a Chinese steel mill to secure funding for its $1 billion West Australian iron ore project.

Aurox has already signed sales agreements with Hebei Iron & Steel and another China steelmaker, Rockcheck Steel. You would have to think that the “unnamed Chinese steel mill” is one of those two – in many cases, development finance and off-take agreements involve the same parties.

And today we have seen DMC Mining confirm it is targeting a resource of between 700 million tonnes and 1 billion tonnes at its iron ore project in the Republic of Congo (or Congo-Brazzaville as it’s usually known to distinguish its from the bigger Democratic Republic of Congo to its south).

Reports from Mumbai show that India’s iron ore prices rose this week on the continuation of heavy Chinese buying. India, already the third largest supplier of iron ore to China, is seen to be benefiting from inconclusive contract talks and disputes with Australian suppliers.

The Hyderabad-based and government-owned NMDC, India’s largest iron ore producer, said it was expecting a 13 per cent rise in iron ore sales this financial year due to rising demand for steel from the construction and automobile sectors.

The writer implies no investment recommendation and this report contains material that is speculative in nature. Investors should seek professional investment advice.