Noble rallies on $3.5 billion dealCommodity supplier Noble Group...

Noble rallies on $3.5 billion deal


Commodity supplier Noble Group has been on a four day winning streak, soaring 13% versus the STI’s 2.9%. Its close of $1.205 yesterday after climbing another 4.3% is 12% above its 20-day moving average price of $1.07. The rally in Noble’s shares has come on the back of an iron ore deal announcement on Tuesday.

Noble’s $3.5 billion per year deal
On 25 March, Noble announced on the SGX that it has signed a 10-year supply agreement with Sundance Resources, who is planning to mine iron ore in central-west Africa. According to a report on Business Spectator, the Noble-Sundance deal may be worth as much as US$3.5 billion a year, based on a sales price of US$100 a tonne after costs.

According to the deal, Noble will buy 100% of the iron ore mined at the Mbalam-Nabeba project in Cameroon and Republic of Congo, which has been forecast to produce 35 million tonnes per year for 25 years. After taking up the mine’s produce, Noble will be selling the ore with 62.6% iron content to steel factories across the world.

In the meanwhile, Bloomberg reported on the same day that iron ore entered a bear market on March 7, pressured by both miners boosting global supply and concerns that a possible slowdown in China may curb demand.

Source: Macquarie Research - 28 Mar 2014