I wanted to raise the same point but I didn't because I would have been roundly abused by day traders.
It seems quite obvious that prior to the resources infrastructure boom iron ore supply was inelastic and demand couldn't respond to supply. So the market expanded to include all sorts of low grade like AGO, and the price went up.
Now we've had the resources infrastructure boom and there's plenty of spare capacity sitting over far better resources than AGO can ever hope to supply from their resource portfolio. So now iron ore is fully elastic and supply can respond rapidly to whatever demand can throw at it for at least another 100 or 200 mtpa of gear running at close to 62% fines.
It worth noting AGO's excursion into jump, which is probably too little, too late, and too low grade to make a huge difference. Customers can get better grade hematite lump with better metallurgy from either Vale, RIO, or BHP - they certainly don't need to go chasing medium grade goethitic lump from Mt Webber.
The majors will be enjoying selling into the higher prices, but any sign of the market share shifting will see any of RIO, BHP, FMG, Vale and now Roy Hill tweak production.
As for AGO's costs "being just above the Big 4" - if 150% higher was "just above" I'd fully agree with you, but saying US$50 is "just above" US$20 shows a very poor grasp of the value of money.
AGO Price at posting:
1.6¢ Sentiment: None Disclosure: Not Held
