Something has to give from the majors. Blood is on the streets and this is my opinion of the IO markets. Majors now have 75% combined market share and this is the turning point for IO as this is best time to capitalise on dominance to turn into increased profits.
Geo-political forces for IO upside.........
- Brazil disaster and compensation looming.
- Mine safety now in the minds of many so you would have to think output will certainly not increase because of this.
- ATO tax for multinationals (about bloody time). Better start making better profits to pay up?
- Market stabilization is needed for global commodity markets.
- Agreement with 200 countries on lowering emissions and global temperatures. Targets starting in 2020. So why wouldn't China and India put the urbanisation pedal down to the metal for one last time to capitalise from now till 2020?
- China pledge to keep growth at high levels of around 7%
- Silk Road commitment and fast track?
External forces for IO upside.........
- Chinese stimulus to property market and infrastructure imminent?
- More Chinese tonnes out now. What is the latest Chinese tonne number?
- Developers big city China land-grab sowing seeds of next China property boom.
- Dubai-based developer Damac Properties in strategic collaboration with Qfang, one of China's biggest real estate & financial services companies. Looks to strengthen its sales operation in China.
Possible China policy / stimulus options?
Promoting more rural immigrants to move to 2nd and 3rd tier cities.
Turning excess stock into affordable housing to clear inventory.
Reduction in down payments for first time home buyers to 20% from 25%.
Lowering capital gains tax on property.
Officials could make mortgage payments tax deductible.
- Chinese and high cost tonnes have already come out of the market. Major tonnes are next?
- India has begun its urbanisation vision. First major 'smart city' in Navi Mumbai India's first major smart city is taking shape over a 75 sq km area with seven nodes in Navi Mumbai. New township next to upcoming airport. Many projects underway including port city and infrastructure.
- Even the big mining companies are now takeover targets.
- Any move to squash Aussie local industry I would hope be watched closely by ACCC.
- Aussie miners should band together to fight.
- US rates WILL rise soon. Our AUD dollar will fall. Perfect storm for healthy incoming profits with recovering IO markets.
- Hedging on the IO ups will keep Aussie miners profitable including AGO. Keep it up!
- Debt is cheap now. Best time to renegotiate and extend if necessary. With recovering markets, debt 'issues' bears remind us of will be easily dealt with and paid off promptly.
- IO could easily climb back to 60-70 per tonne (with an announcement from China) which would make any debt issue become a past memory. AGOs debt for example could be paid off in just over a year?
- Saying IO will remain in 30s for many years is no different to saying IO would of remained at 180 per tonne for another five years or houses in the 80s in Australia would of remained at $85000 now to purchase. It shows posters / investors / analysts are possibly too young to remember history of what assets actually cost back then relative to income which was a third of that is now. Markets are dynamic and will rise to the smallest upside from here as prices cannot be sustained at these levels LT.
- Chinas oct / nov data has bottomed? (Stimulus kicking in as there are signs markets are recovering). Watch this space over the next few months in the news. Especially the property and infrastructure space.
- Roy Hill left port. Doomers can now tick that box and move on from this doom duck.
- Vales new tonnes will replace its own inefficient tonnes as it fazes out costly tonnes of its own. It has to be as it needs to focus on healthy fat profits now along with other majors.
- Majors shift into profits using its increased market share? Of course!
Internal forces for IO upside?.......
- CEO / MD performance?
- Shareholders happy with this one man standing strategy? Market fed up?
- Promoting investor confidence with capital growth not capital losses?
- Better dividends?
- New investors?
- Maintain rating?
Media forces for IO upside.......
- Doom and gloom is exhausted and simply very old journalism. About time we start reading about demand dynamics and potential upside from our experts. Earn your dollar!
- IO has bottomed for a third time.
- Market is already aware of ridiculously bearish forecasts and are catching on to the song being played on repeat for far too long.
All I see is upside for the price going forward. Argument has weakened why majors would still want IO markets to remain in the dumps in the name of that extra 1-4% market share wins no friends (especially in Australia) and no real benefits for healthy local competition.
2016 will turn upside down on its head. Futures and spot market both will fire. Just wait and see.
Aussie miner options:
Close the most inefficient mines.
Costs still falling. Keep working hard boys!
Extension of debt covenant reviews
Use debt to payoff current debt as its cheap now to borrow. Buy time.
Hedge IO and hedge some more when it bounces. This is protecting Altas.
Stockpile ore if necessary.
Merge with another miner to boost cash and market share. Atlas Iron? Mount Gibson? BC Iron? FMG? 'Aussie Iron!' Why not Twiggy to invest further in its local Aussie neighbours to extend his presence in the Pilbura to show Rio and Bhp that Aussie battlers stick together.
Sell a mine to boost cash?
Cap raise?
Diversifying when the timing is right.
Government support
Government to protect its LOCAL IO industry?
Government to grow a pair and tax IO by volume. If you have the humble privilege to mining Australia's finite resources up to 300 million tonnes its a progressive tax for miners and multinationals and a win for the Australian people. This might make multinationals think twice on their supply. Come on Australian Government get with it!
I wish all LT holders the best in the IO space.
FMG Price at posting:
$1.80 Sentiment: Buy Disclosure: Held
(20min delay)