yml and the umc effect...

I wonder if some traders who had exposure to UMC (and LML) decided to dispose of some of their iron ore stocks yesterday after being burned by actual results.

Some harsh lessons being learned this week - ARU - LML - UMC.

UMC were always at risk of disappointing on the iron ore. Sure Rhodes had been around a long time picking up these tenements all over the place but he sold all his best ones ages ago. UMC just had boundary riding stuff. Their market cap was in no way justified.

LML hoodwinked most people into thinking that if you have a banded iron formation then you are a shoe-in to have a big iron ore resource there also. Nothing could be further from the truth. BIF's are everywhere. The trick is to find areas of enrichment. LML's results were exactly what is expected of BIF's. Beware anyone investing in GNL and IRM they have the same strategy!

ARU was also always going to be marginal. Never fall in love simply because a commodity is hot (read rare earths and U). Grades at Nolans are too marginal. You can tell they were struggling to bring it up as they included phosphoric acid as a product. Lynas Corps deposit is over 10% rare earths by comparison.

That brings us to YML. Much of YML's movement over the past few weeks has simply been a re-rating as YML moved closer to it's peers valuations based on YML's JORC resource.

Luckily we now have some clear indications of what the market is paying for iron ore due to some M&A activity.

According to Gindalbie's acquisition of SDL - the market is paying $1.9 per tonne of 'target' resource. Using that as a basis YML should be capped at $190m at least (100mt target) given that YML have actually increased the confidence in the resource (i.e. 30mt JORC compliant).

The MMX acquisition of MIS pay's approximately $3 per tonne of iron ore (MIS have approx 150mt of 500mt target in JORC category).

Using the implied value from MMX - we get $300m for YML.

In short - UMC/LML and YML are totally different.