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What is really happening with Iron Ore

  1. cfarrington

    19 Posts.

    There is a lot of dribble on this thread. This is my rant and it is based on fundamentals.

    The current IO price is artificially being driven down by the Top Tier Miners. High supply volumes at low prices blow up junior players and deter competition. Countries like China, India, Canada and Indonesia have already started reporting casualties. Whilst these environments impact short term earnings and SP's of the major players it also creates a long term pathway for strong marginal returns with lower competition.

    Volatility during times like this have banks running scared ultimately drying up funding facilities for the little players to leverage off. The little players will start to drop off reducing supply volumes and stabilising the IO price.

    The IO price is never going to bounce back drastically to $100p/t but it will bounce back to around $70-$80 over the next 2-3yrs. The fundamentals need to be remembered during times like this. Mines have life spans, even BHP,RIO & Vales mines have life spans. To start a new low cost producing mine will set a company back billions ($$$). The big boys will not allow negligible returns for too long as it eats away the life of their mines and disgruntles uneducated shareholders with low returns. The low IO price is creating a fantastic environment for the Big Boys to pick up cheap assets from the juniors who cannot afford to place their mines in a care and maintenance arrangement. These times also create opportunity to renegotiate agreements with contractors and employees who work on a mine charging ludicrous prices/fees. Thus reducing the cost to produce IO.

    A Few Facts:
    *China's growth is slowing, not declining, meaning it is still going to maintain year on year growth.
    * India has a 20yr vision underpinned by a government who wants to improve the living standards of over 1Billion people.
    * The world is very different place to what it was 20yrs ago, people are consumers....they live to consume and replace goods regularly. We no repair things, we replace things.
    * The trend is seeing an increase in concrete and steel cities, not timber houses.
    * The trend is seeing an increase in car, motorbike and truck sales not horse and cart.

    The current IO price is being manipulated by the big boys the same way the Saudi’s have been manipulating the oil price. This is a good thing for Australia!

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