There’s no shortage of iron ore in the world, but there is a...

There’s no shortage of iron ore in the world, but there is a shortage of railways and ports.

It's that capacity shortage latecomers should consider if joining Australia’s great iron ore party, which has sent some stocks such
as Fortescue Metals Group and Portman Mining into orbit while contributing greatly to powerful price increases in leading
resource stocks such as BHP Billiton and Rio Tinto.

Separating a very crowded house into its component parts of good, bad and ugly is essential for successfully playing the hottest
game in the resources sector. And it's not too late! However, if you are hunting for iron stocks with “big” potential the sector,
those with latent appeal must be the “mid cap” miners – stocks such FerrAus, Iron Ore Holdings, BC Iron, Territory Iron and
Centrex Metals.

To understand why railways and ports are so important, consider first the nature of iron ore: a relatively low-value “bulk”
commodity that is traded in millions of tonnes, not kilograms or grams.

Then ask yourself three questions:

1: Has your preferred iron ore investment got any hope of ever getting a tonne of iron ore to a port, let alone taking the next
critical step and get it on to a ship? In most cases the answer is no, so think again.

2: Is your preferred iron ore investment proposing to mine haematite, or some other high-grade material grading more than 55%
iron (as is held by BHP and Rio) or a low-grade ore such as magnetite which grades around 33% iron (as makes up much of
reserves held by “hot” junior Gindalbie Metals)? If it’s haematite, proceed. If it’s magnetite, take care because the essential
upgrading before shipping adds to the cost and risk.

3: Will your preferred investment become a takeover target in the consolidation phase of the iron ore sector that has just started?
If the answer is yes, proceed with caution for what might be a big payday.