Written back in 2007 by the Eureka Report but still applies...

Written back in 2007 by the Eureka Report but still applies after the GFC in my book:

"Here's what really matters when investing in mining:

�EThe price outlook. This is an astonishing factor when it is considered that the world is six years into a resources boom. If history was an accurate guide the iron ore price should be falling under the pressure of Adam Smith's invisible hand; that immutable law of supply rising to meet demand. This time around supply is struggling to meet demand thanks to China's industrial revolution, and rather than tipping a price fall the experts are tipping more increases next year. Citigroup says 20% Goldman Sachs says 9%.

�EThe supply/demand outlook. All producers are rushing to expand production, but there simply is not enough capacity to satisfy demand, not yet. In time, that will change. But building a new iron ore project takes years and China alone is demanding the equivalent of a new Fortescue (and its first-stage target of 45 million tonnes) every year just to keep its blast furnaces full. The boss of Brazil's iron ore giant CVRD, Fabio Barbosa, said last week that: "This is a cycle of prosperity much longer than we had previously imagined."

�EThe metal intensity of China's revolution. This fact underpins the demand side of the equation because China is in a high metal-use phase of its transition from a rural to an industrial economy.

�ECracking the oligopoly. High profit margins make the shareholders happy, but deeply annoy the customers. This is a big factor in China (and Japan) actively encouraging new producers, such as Fortescue, so they can boost supply, shop more widely, and possible drive prices down.


Sundance Resources ($0.47): One of the brave new breed of Australian miners prepared to tackle the challenge of Africa, Sundance has its foot on an A-class iron ore deposit in Cameroon. Discovered almost 30 years ago by geologists working for the United Nations and a Canadian Government aid agency, the Mbalam ore body is already known to contain 218 million tonnes of premium material. Getting it to a port and then to a market has always been the challenge (not to mention the risk of investing $2 billion in central Africa).

Times change, prices rise, Africa has become less daunting, and Mbalam is now the subject of a major drilling campaign, which Sundance believes will yield a billion tonnes of iron ore, and permit the development of the project which looks awfully like that of Fortescue �Ebut with an African flavour."




C'mon!!!!!!!!!!!!!!!

taltktome