MXR is identified in the Mineweb article as the cheapest stock...

MXR is identified in the Mineweb article as the cheapest stock in the list.
The article is primarily about iron ore and coal ( MXR iron ore royalty deal with Flinders) but the MXR inclusion I presume is because of the Narndee base metals project with MXR's large tenement holdings in Western Australia.


ENERGY
FRONTIER INVESTING
Megatrends: iron ore and coking coal

The investment version of a benevolent tsunami is again building up in the form of dozens of iron ore stocks on the move.
Author: Barry Sergeant
Posted: Tuesday , 02 Mar 2010

JOHANNESBURG - -

For some months now, the most noticeable positive net portfolio flows among global resources have been directed to the broad classification of iron ore stocks, followed closely by nickel miners, and certain classifications of coal miners. By now, there should be no surprise as to the heat that continues to gather around these stocks. In Chinese waters, spot prices for iron ore have moved up to around the USD 140/tonne level, compared to contract prices trading roughly 50% lower.

There are increasingly numbers of estimates and forecasts that contract iron ore prices will be raised by up to 50% this year. Coking coal, a natural bedfellow to iron ore, and a highly specialised but bulk market, is also running up the price curve. China remains the world's No 1 miner of iron ore and coal, but has become a net importer of both, with coal going into that mode just last year.

Nickel, a bedfellow downstream for processing into stainless steel, is back on the radar screen after radical, fundamental, changes in the market that saw prices completely collapse in the second half of 2007. Nickel pig iron is back, a product of Chinese smelters that use tropical laterite ores, typified by that available at Acoje in the Philippines. The ore is gifted limonite (usually grading 47% to 59% iron, 0.8 to 1.5% nickel, along with trace cobalt).

Outside China, significant nickel production capacity has been curtailed or shut down in the past two years, allowing for development of a new equilibrium in supply-demand. Nickel prices continue to rise; the best of breed are already back in the money. Australia's Western Areas, which owns two of the world's highest grade nickel deposits in Flying Fox and Spotted Quoll, recently reported a 209% increase in interim revenues for the six months to 31 December 2009. Operating cash flow increased massively to AUD 50.4m from AUD 3.8m in the comparable 2008 period.

But nickel remains a relatively small base metal. The big money is in seaborne iron ore, which has established itself over the past seven or so years as the world's most profitable mining franchise. Brazilian supergroup Vale increased iron ore sales, including pellets, from USD 3.5bn in 2000 to USD 22.2bn in 2008. Sales fell after demand dropped in the first half of last year, and after contract prices fell sharply in the second half, to USD 14.2bn as a whole for 2009.

Vale put it so earlier this year: "Chinese iron ore imports in 2009 reached an all-time high figure of 627.8 million metric tons, up 41.6% on a year-on-year basis, driven by steel production growth and the increasing reliance on imported iron ore".

Contract iron ore prices
















USD per dry metric ton unit
















Rio Tinto





2007


2008


Change


2009


Change

Yandicoogina Fines





0.8042


1.4466


79.9%


0.9700


-32.9%

Pilbara Blend Fines





0.8042


1.4466


79.9%


0.9700


-32.9%

Pilbara Blend Lump





1.0264


2.0169


96.5%


1.1200


-44.5%

Vale's volume of iron ore and pellets sold in 2009 reached 247mt, against 296mt in 2008, a decrease explained by the significant fall in iron ore demand during the first half of 2009. These numbers can be compared with iron ore sales, including pellets, of some 145mt in 2000.

The megatrend is summated by Vale: "In light of the increasing deterioration in quality of [Chinese] internally produced iron ore and the modernization of the Chinese steel industry, requiring higher quality raw materials, the share of imported iron ore in apparent domestic consumption rose from 15% in 1985 to 25% in 1995, and to 50% in 2005, reaching 72% in 2009".

As for coal, China became the world's largest importer of coal in 2009. On Vale's market intelligence, China in 2009 imported 104mt of coal, against net exports of 4.6mt in 2008. Given the increasing demand from China and India for thermal coal, the Pacific market has been increasingly tight, Vale remarked earlier this year, against a still weak Atlantic market.

The market scenario for Chinese coking coal is similar to iron ore. Vale puts it so: "There is robust demand growth derived from a continued steel production increase. On the supply side, coal fields are moving inland while steel mills are increasingly concentrated in coastal areas and requiring high quality coking coal in the face of a decline in the quality of limited coal reserves. As other countries are running steel mills at increasing rates of utilization, the market for coking coal is expected to become tighter in 2010".

Immaculate timing for new entries to seaborne iron ore would have been around seven years ago. In 2003, Australia's Metal Group acquired Allied Mining & Processing. Going beyond substantial tenements at Mt Nicholas, the new owners promptly acquired Iron Ore Australia, along with its Mt Lewin tenements. The acquiring group bought with it a new CEO, Andrew "Twiggy" Forrest, and a change in name to Fortescue Metals. Today, with a market value of USD 13.1bn, Fortescue is one of the world's bigger mining stocks, and Forrest features regularly in rankings as Australia's richest fellow.

At this point, Rio Tinto and BHP Billiton, which, together with Vale, hold about 75% of the global seaborne iron ore market, rank as two of the world's most heavily demanded resources stocks. Vale is close behind. After voracious bouts of profit taking across the second half of 2008, it seems that iron ore's megatrend is back in place, accompanied, this time, by the rise of coking coal.

Selected iron ore names







THE THREE KINGS


Stock


From


From


Value




price


high*


low*


USD bn

Vale


USD 28.46


-11.0%


140.8%


150.517

Rio Tinto


GBP 34.65


-8.4%


162.1%


122.664

BHP Billiton


GBP 20.75


-4.5%


102.4%


192.549

Big three averages/total





-7.9%


135.1%


465.730

Weighted average





-7.7%


127.8%


















TIER II, PURE/DIVERSIFIED










Evraz


USD 33.40


-8.5%


307.8%


13.860

Minmetals


CNY 17.23


-37.5%


7.7%


2.705

Hunan Valin


CNY 6.40


-38.8%


32.2%


2.567

Severstal


USD 11.79


-7.9%


262.9%


11.885

Citic Pacific


HKD 17.90


-26.2%


149.3%


8.412

Vedanta


GBP 25.69


-13.4%


421.4%


10.404

Gerdau


BRL 20.49


-13.0%


134.2%


5.660

Steel Aut. India


INR 224.65


-15.9%


223.2%


20.152

Beijing Shougang


CNY 5.35


-28.3%


55.1%


2.325

Orissa Sponge


INR 346.90


-26.7%


28.0%


0.151

NMDC


INR 434.80


-24.0%


210.3%


37.439

CAP


CLP 16,095.00


-7.0%


112.0%


4.584

Fortescue


AUD 4.70


-15.6%


115.6%


13.123

Anglo American


GBP 24.51


-17.3%


170.5%


48.212

ENRC


GBP 10.63


-2.0%


251.7%


20.457

CSN


USD 33.49


-12.2%


182.6%


25.291

Mechel


USD 23.70


-11.0%


679.6%


9.866

Kumba Iron Ore


ZAR 366.00


-4.1%


161.4%


15.441

MMX Mineracao


BRL 13.16


-8.2%


521.3%


2.234

ARM


ZAR 191.17


-1.3%


78.7%


5.324

Cliffs Natural


USD 59.08


-0.4%


400.7%


7.989

Usiminas


BRL 52.47


-7.5%


151.2%


7.373

Sesa Goa


INR 419.40


-4.6%


490.3%


7.492

Assore


ZAR 725.00


-3.3%


113.2%


2.656

Labrador Iron


CAD 47.86


-5.6%


99.3%


1.476

Magnitogorsk


USD 1.00


-8.5%


347.1%


11.141

Tier II averages/total





-13.4%


219.5%


298.216

Weighted average





-14.0%


196.9%


















TIER III, DEVELOPERS & OTHERS










Golden West Resources


AUD 0.70


-34.0%


164.2%


0.090

Ferrexpo


GBP 2.90


-1.8%


548.0%


2.551

Aquila


AUD 9.82


-13.7%


468.6%


2.847

Mount Gibson Iron


AUD 1.62


-13.6%


284.5%


1.565

AusQuest


AUD 0.12


-41.0%


43.8%


0.024

Murchison


AUD 2.49


-15.3%


378.8%


0.975

Cons.Thompson


CAD 8.85


-1.3%


527.7%


1.964

Atlas Iron


AUD 2.03


-14.0%


82.1%


0.816

Gindalbie


AUD 1.02


-21.5%


102.0%


0.649

Australasian Resources


AUD 0.44


-37.1%


51.7%


0.175

Northern Iron


AUD 1.34


-33.0%


64.8%


0.352

African Minerals


GBP 3.72


-18.2%


1573.0%


1.300

London Mining


NOK 20.30


-20.7%


126.8%


0.372

Baffinland


CAD 0.52


-30.7%


188.9%


0.171

Sundance Resources


AUD 0.14


-37.2%


92.9%


0.329

Cardero Resources


CAD 1.33


-32.5%


51.1%


0.075

Northland Resources


CAD 2.02


-2.4%


431.6%


0.215

Sphere Investments


AUD 1.25


-14.7%


492.9%


0.169

Admiralty Resources


AUD 0.01


-67.6%


9.1%


0.023

Giralia


AUD 1.68


-7.9%


435.1%


0.269

Sarda Energy


INR 199.90


-19.6%


299.8%


0.148

Red Hill Iron


AUD 3.35


-18.7%


235.0%


0.132

CBH Resources


AUD 0.12


-37.8%


271.0%


0.113

Strike


AUD 0.69


-44.6%


137.9%


0.081

Brockman


AUD 3.39


-1.2%


318.5%


0.423

Golden West Resources


AUD 0.70


-34.0%


164.2%


0.090

Centaurus Resources


AUD 0.06


-21.1%


122.2%


0.032

Ferraus


AUD 0.93


-3.6%


516.7%


0.148

New Millennium


CAD 1.15


-1.7%


325.9%


0.147

Petropavlovsk


GBP 9.72


-27.7%


138.8%


2.644

Indo Mines


AUD 0.30


-45.5%


93.5%


0.025

Cape Lambert


AUD 0.44


-30.7%


109.5%


0.224

Great Northern


USD 96.01


-1.1%


59.0%


0.144

Beowulf Mining


GBP 0.04


-21.6%


190.0%


0.003

Centrex


AUD 0.53


-34.4%


218.2%


0.146

Grange


AUD 0.39


-39.6%


102.1%


0.040

Sandur


INR 518.25


-33.8%


197.8%


0.098

Nalwa


INR 1,046.90


-30.4%


132.6%


0.117

BC Iron


AUD 1.15


-22.1%


244.3%


0.087

Western Plains


AUD 0.59


-13.9%


318.4%


0.056

IMX Resources


AUD 0.45


-10.1%


169.7%


0.080

Flinders


AUD 0.12


-39.1%


135.3%


0.196

Iron Ore Holdings


AUD 2.28


-8.8%


1472.4%


0.264

Mindax


AUD 0.49


-10.9%


50.8%


0.058

Aurox Resources


AUD 0.29


-41.8%


216.7%


0.050

Polaris Metals


AUD 0.71


-18.4%


610.0%


0.128

Haoma Mining


AUD 0.11


-46.3%


100.0%


0.018

Cullen Resources


AUD 0.05


-45.3%


88.0%


0.024

Adriana Resources


CAD 0.43


-40.3%


152.9%


0.033

Jupiter Mines


AUD 0.26


0.0%


200.0%


0.085

Macarthur Minerals


AUD 1.60


-8.6%


146.2%


0.037

Talisman Mining


AUD 0.96


-33.7%


377.5%


0.090

Anglesey Mining


GBP 0.32


-1.6%


740.0%


0.072

Ironclad


AUD 1.32


-16.5%


704.9%


0.052

Helix


AUD 0.08


-39.5%


82.9%


0.009

Maximus


AUD 0.02


-46.3%


4.8%


0.005

Venture Minerals


AUD 0.33


-35.0%


296.3%


0.044

Apollo Minerals


AUD 0.18


-56.3%


29.6%


0.019

Monax Mining


AUD 0.09


-22.5%


342.9%


0.012

Iron Mountain


AUD 0.07


-54.5%


32.0%


0.007

Cazaly


AUD 0.35


-33.0%


163.4%


0.031

Red Rock


GBP 0.02


-18.8%


129.4%


0.017

Renison Consolidated


AUD 0.01


-50.0%


500.0%


0.010

Baobab Resources


GBP 0.07


-62.5%


440.0%


0.016

Centrex Metals


AUD 0.53


-34.4%


218.2%


0.146

Averages/total





-25.9%


269.2%


21.329

Weighted averages/total





-17.7%


260.9%



Overall averages/totals





-22.2%


253.5%


785.276

Overall weighted averages


-10.5%


152.7%




* 12 month

Source: market data; tables compiled by Barry Sergeant