Harvett,You correctly point out the divergence between FMG's &...

Harvett,

You correctly point out the divergence between FMG's & AGO's performance: short FMG, long AGO would be a decent pairs trade right here, I suspect.
Successful shorter Jim Chanos (famous for shorts like Enron, Macquarie) is in the press as having bought into BHP & RIO but apparently shorting "leveraged Aussie iron ore" counters. For that to be in the press, he is already set, and no doubt hoping others will follow. However, even though AGO has a drawn down debt facility, it is net cash (i.e. not financially leveraged, although is operationally leveraged vis-à-vis BHP & RIO given higher costs), so unless AGO becomes heavily cash flow negative over the next few years, and/or China has a recession (as opposed to lower growth), the risks now lie to the upside IMO.