junior iron ore stock prices skyrocket

Taken from the GDA thread


Junior iron ore stock prices skyrocket
Email Print Normal font Large font May 2, 2008 - 5:46PM

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The share price of junior iron ore mining stocks have skyrocketed this week, driven strong Chinese interest in the sector and positive sentiment surrounding Fortescue Metals Group commencing exports in the next fortnight.

Expectations that Chinese steel mills will bend to pressure from Rio Tinto Ltd and BHP Billiton to lift benchmark iron ore prices by up to 84 per cent are also underpinning the bullish sentiment.

Among the top junior iron ore performers on Friday were Aurox Resources Ltd, up 24.34 per cent to 94.5 cents, Gindalbie Metals Ltd gaining 20.88 per cent to $1.10, BC Iron Ltd rising 17.89 per cent to $1.45, and Brockman Resources Ltd adding 12.82 per cent to $2.64.

Shaw River Resources was up 9.38 per cent to 10.5 cents, Territory Resources gained 7.69 per cent to 91 cents, Atlas Iron Ltd jumped 6.65 per cent to $3.37, Fortescue Metals Group (FMG) climbed 5.39 per cent to $8.21 and Mount Gibson Iron surged 5.14 per cent to $3.07.

"The confidence is coming back into the small end of the market," DJ Carmichael head of research Paul Adams said.

"There is a little bit of a tide turning.

"Comments by (US Federal Reserve Bank chairman) Ben Bernanke saying `we might be at the bottom here' have helped and we've seen a dramatic increase in confidence in the small end of the market this week.

"Iron ore is still on everybody's lips.

"Stock prices have been in the doldrums in the past quarter, especially at the junior end. Now people are saying `hang on, now is a good time to get in'.

"People are thinking `I might not just dip a toe in - I might dip a whole leg in'."

Mr Adams said investors seemed to be taking long-term positions and observed selling starting to dry up.

He said companies such as BC Iron and Atlas Iron were performing particularly well, given their proximity to FMG's flagship Pilbara operations and memorandum of understandings (MOUs) to use FMG's newly constructed railway.

"Some of the scepticism around Twiggy's (FMG chief Andrew Forrest's) project has all but disappeared and once it gets up and running, BC Iron have a pretty strong, although non-binding MOU.

"FMG has already set aside some capacity for BC Iron, which has been pretty flat for a long time after a very successful debut, running up to about $2, but it has settled down to the $1 mark over the last quarter.

"It has taken off dramatically in the past couple of days."

DJ Carmichael have placed a $1.85 share price valuation on BC Iron, which will issue a scoping study for an iron ore mine shortly.

Atlas Iron has released a flurry of announcements recently, including a heavily oversubscribed $100 million institutional capital raising and additions to its Pilbara landholdings, which is now one of the largest in the region - at 9,000 square kilometres.

Mr Adams said iron ore attracted a lot of investor attention because it was one of the most stable commodities.

"People know what they've got in terms of pricing.

"Looking at the All Ords, we might be heading away from that bear trend.

"This smells a little bit like a rally."

© 2008 AAP