· Metals: Copper +2.0% to $4.12lb, iron ore +6.84% to...

· Metals: Copper +2.0% to $4.12lb, iron ore +6.84% to US$139.10/t, Gold 0.0% to US$1,781/t

· Energy: Brent crude -1.9% to US$65.2/bbl, WTI -2.1% to US$62.1/bbl, thermal coal -3.5% to $160/t

· Keyovernight stock moves: BHP LND +0.9%, Rio Tinto LND +0.7%, S32 (LDN) -2.8%, Anglo -1.5%, Glencore +0.8%, Vale +0.9%, Shell +0.6%, BP 0.0%, Exxon 0.0%, Chevron 0.0%, ConocoPhillips +0.6%

· GlobalIndices: S&P 500 +0.81%, DOW +0.65% & FTSE +0.41%

• Iron ore prices plunged by 15% last Thursday to $130/t and have fallen 44% from a high of $233/t in May 2021.
• The ferocity of the pullback has surprised many with consensus at $190/t for 3Q21 and $170/t for 4Q21.
• We assess the potential earnings cuts, and impact on valuation metrics and balance sheets for Buy rated iron ore producers BHP, Rio Tinto, and Vale.
• We conclude that despite c.10% cut to FY22e EBITDA assuming spot iron ore, spot EV/EBITDA (FY22e) multiples of 3.8x remain c.30% below five year averages.
• In addition, FCF and dividend yields are also attractive at 15% and 10% respectively.
• Similarly, balance sheets remain with an average 0% net gearing (ND/ND+E) and 0.0x ND/EBITDA in FY22 assuming spot iron ore of $130/t.
• So while iron ore prices have nearly halved in three months, BHP, Rio Tinto, and Vale continue to screen attractively in our view.
• Furthermore, with average all-in iron ore cash costs of $40/t (CIF China), our iron ore coverage stocks continue to generate significant FCF allowing for sustained high shareholder returns.