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Page 21 AFR: Funds shorting mining service stocks lift bets

Australian hedge funds are increasing bets that mining services companies will come under selling pressure in the months ahead as mining profits shrink.

Among the most shorted mining-related stocks on the Australian share market are mining services firm Ausenco , junior miner Atlas Iron, Arrium Mining and junior gold producer Kingsgate Consolidated, according to data published by the Australian Securities Exchange.

One hedge fund manager, who asked not to be named, said the company has been shorting a number of stocks in the mining services sector on the expectation that “industry conditions will continue to deteriorate and that the success of this strategy will be felt in the coming 12-18 months”.


Page 18: Atlas shrugs off crash in price of iron

Atlas Iron chief executive Ken Brinsden is playing down the latest slump in the iron ore price, saying volatility is to be expected and tipping an average price of between $US110 and $US130 a tonne in the short term.

Iron ore miners’ profits are highly sensitive to fluctuations in the spot price. Credit Suisse analyst Paul McTaggart said the price fall was unsurprising, given it was driven by seasonal factors and had created “a bit of a storm in a teacup”.

Deutsche analyst Paul Young agreed, saying it was “seasonal and trader-driven”.

Atlas makes profits if iron ore is more than about $US82 a tonne, compared with about $US72 for Fortescue Metals Group ,$US45 for BHP and $US43 for Rio Tinto.