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Iron ore scores a win
Following glimpses of hope that the global credit markets crisis has eased, investors raised the value of listed iron ore stocks by tens of billions of dollars on Tuesday. The charge was led by Australian investors; the stock price of advanced developer-miner Fortescue rose by 55% on the day, increasing the market value of the stock to USD 8.6bn.
The buying of iron ore specialists was widespread and determined on the day in Australia, one of the world's leading iron ore countries. Stocks such as Strike, Admiralty, Gindalbie, United Minerals and Western Plains finished higher by more than 20%.
The other global resources subsector that turned in a strong performance, starting overnight Monday in US markets, was listed coal stocks, also representing a bulk commodity. Strong demand for iron ore stocks continued on Tuesday, with Ferrexpo rising 14% in London, Kumba Iron Ore was sharply up in Johannesburg, as was Baffinland in Canada, gaining more than 20%.
Under the strong flow of investor cash into iron ore stocks, however, are found stock prices that are deeply oversold, in line with the losses found in the broader global resources sector. The average iron ore stock is trading some 60% off its highs; even after Tuesday's significant increase, Fortescue's price was left standing 67% off its highs.
Recent reports from analysts at Macquarie have suggested that Rio Tinto and BHP Billiton, No 2 and No 3 in seaborne iron ore, may have to ease annual contract iron ore prices in 2009, on the basis of reports from the Chinese region that spot prices are falling. Analysts at UBS are forecasting contract iron ore prices dropping 15% in 2009, the first decline in seven years.
It has been reported that cash prices for iron ore sold to China fell 20% last week to around USD 120/t. Benchmark contract prices for Australian fines ore were settled earlier this year at USD 144.66/t. The two big seaborne suppliers, along with Vale, ranking No 1, typically start annual contract talks in October to set prices for the following year, starting in April.
Vale settled its contract prices in February, wining a 71% gain; BHP Billiton and Rio Tinto scored increases of up to 97% in July. Separate to underlying supply and demand of iron ore, The Baltic Dry Index, an influential measure of shipping costs for commodities, has fallen 83% from highs earlier this year, allowing downward adjustments to be made to contract prices, but not for account of the miners.
Selected iron ore names |
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THE BIG THREE | Stock | From | From | Value |
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| price | high* | low* | USD bn |
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USD 14.90 | -66.3% | 41.9% | 73.010 |
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GBP 27.61 | -61.5% | 20.8% | 69.891 |
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GBP 10.45 | -52.6% | 18.8% | 113.176 |
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Big three averages/total |
| -60.1% | 27.2% | 256.077 |
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Weighted average |
| -59.8% | 25.2% |
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TIER II, PURE/DIVERSIFIED |
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INR 191.05 | -63.5% | 9.9% | 15.754 |
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CAP | CLP 9,600.00 | -64.5% | 33.4% | 2.375 |
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UAH 6.30 | -30.0% | 58.7% | 2.662 |
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GBP 16.42 | -55.4% | 25.2% | 38.655 |
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GBP 5.02 | -67.6% | 31.1% | 11.321 |
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USD 15.18 | -71.1% | 62.4% | 12.208 |
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Mechel | USD 10.14 | -82.7% | 55.8% | 4.221 |
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ZAR 142.05 | -62.5% | 17.4% | 5.006 |
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MMX Mineracao | BRL 4.62 | -79.0% | 37.5% | 0.675 |
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ARM | ZAR 137.00 | -55.4% | 19.1% | 3.222 |
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Cleveland-Cliffs | USD 33.21 | -72.8% | 30.9% | 3.544 |
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AUD 21.18 | -0.8% | 175.8% | 2.600 |
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Sesa Goa | INR 87.10 | -60.4% | 11.9% | 1.426 |
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ZAR 530.00 | -37.6% | 44.8% | 1.649 |
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Labrador Iron | CAD 34.10 | -44.3% | 21.8% | 0.950 |
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Magnitogorsk | USD 0.31 | -79.1% | 0.0% | 3.464 |
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Tier II averages/total |
| -57.9% | 39.7% | 109.733 |
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Weighted average |
| -64.1% | 28.6% |
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TIER III, DEVELOPERS & OTHERS |
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AUD 4.37 | -66.8% | 63.1% | 8.572 |
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GBP 1.03 | -78.7% | 37.7% | 1.065 |
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Aquila | AUD 5.30 | -70.5% | 58.2% | 0.916 |
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Mount Gibson | AUD 0.74 | -80.4% | 9.6% | 0.416 |
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Aricom | GBP 0.14 | -86.8% | 33.3% | 0.287 |
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Murchison | AUD 0.85 | -84.4% | 21.4% | 0.245 |
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AUD 6.36 | -10.4% | 80.2% | 1.028 |
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Cons.Thompson | CAD 2.05 | -79.9% | 28.9% | 0.212 |
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Atlas Iron | AUD 1.10 | -74.8% | 4.8% | 0.224 |
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Gindalbie | AUD 0.53 | -71.7% | 65.6% | 0.190 |
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Australasian | AUD 0.52 | -81.1% | 85.7% | 0.161 |
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Northern Iron | AUD 1.26 | -71.4% | 26.0% | 0.145 |
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African Minerals | GBP 0.67 | -65.6% | 13.6% | 0.220 |
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NOK 27.10 | -28.7% | 69.4% | 0.437 |
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CAD 0.90 | -82.1% | 38.5% | 0.116 |
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Sundance | AUD 0.15 | -81.9% | 81.3% | 0.191 |
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Sphere | AUD 0.87 | -78.8% | 8.7% | 0.090 |
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Sylvania | AUD 0.70 | -77.4% | 25.0% | 0.089 |
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Giralia | AUD 0.65 | -77.1% | 34.0% | 0.080 |
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Sarda | INR 128.15 | -81.6% | 16.4% | 0.091 |
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AUD 3.00 | -58.6% | 1.7% | 0.085 |
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CBH Resources | AUD 0.07 | -89.2% | 34.6% | 0.043 |
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Strike | AUD 0.62 | -80.0% | 40.9% | 0.056 |
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Brockman | AUD 0.69 | -78.5% | 51.6% | 0.064 |
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Territory | AUD 0.32 | -81.6% | 100.0% | 0.059 |
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United Minerals | AUD 0.62 | -78.0% | 25.5% | 0.066 |
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Ferraus | AUD 0.30 | -85.1% | 7.1% | 0.032 |
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New Millennium | CAD 0.50 | -79.5% | 61.3% | 0.046 |
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Golden West | AUD 0.75 | -72.4% | 5.6% | 0.072 |
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Admiralty | AUD 0.05 | -91.1% | 34.2% | 0.040 |
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Cape Lambert | AUD 0.27 | -70.7% | 8.0% | 0.083 |
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Great Northern | USD 68.00 | -53.4% | 70.0% | 0.102 |
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Troy Resources | AUD 1.07 | -73.2% | 5.9% | 0.052 |
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Centrex | AUD 0.19 | -70.3% | 26.7% | 0.035 |
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Grange | AUD 0.70 | -74.5% | 20.7% | 0.056 |
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Sandur | INR 541.75 | -62.1% | 92.1% | 0.054 |
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Nalwa | INR 566.35 | -78.0% | 13.0% | 0.060 |
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BC Iron | AUD 0.40 | -79.7% | 60.0% | 0.017 |
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Western Plains | AUD 0.48 | -74.6% | 50.0% | 0.027 |
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IMX Resources | AUD 0.30 | -62.3% | 20.0% | 0.037 |
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Polaris Metals | AUD 0.17 | -77.4% | 41.7% | 0.019 |
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Iron Ore | AUD 0.26 | -74.0% | 36.8% | 0.021 |
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Erdene Gold | CAD 0.35 | -76.4% | 34.6% | 0.027 |
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Adriana Resources | CAD 0.31 | -77.9% | 29.2% | 0.019 |
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Jupiter Mines | AUD 0.15 | -61.5% | 76.5% | 0.018 |
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Thundelarra | AUD 0.15 | -75.6% | 30.4% | 0.012 |
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Talisman | AUD 0.20 | -86.2% | 11.1% | 0.011 |
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Warwick Resources | AUD 0.19 | -70.4% | 54.2% | 0.012 |
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Ironclad | AUD 0.25 | -87.1% | 31.6% | 0.007 |
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Helix | AUD 0.10 | -83.0% | 26.7% | 0.009 |
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Maximus | AUD 0.09 | -73.8% | 63.6% | 0.010 |
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Venture | AUD 0.15 | -71.2% | 25.0% | 0.008 |
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Apollo Minerals | AUD 0.24 | -54.7% | 20.0% | 0.016 |
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Monax Mining | AUD 0.07 | -89.7% | 16.7% | 0.003 |
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Iron Mountain | AUD 0.13 | -76.9% | 54.3% | 0.006 |
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Cazaly | AUD 0.16 | -77.9% | 47.6% | 0.007 |
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Red Rock | GBP 0.01 | -67.9% | 0.0% | 0.007 |
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Uran | AUD 0.05 | -85.4% | 15.6% | 0.002 |
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Coziron | AUD 0.10 | -49.0% | 12.4% | 0.007 |
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Weighted averages/total |
| -73.5% | 36.6% | 16.080 |
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Weighted averages/total |
| -70.8% | 51.6% |
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Overall averages/totals |
| -69.8% | 36.9% | 381.891 |
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Overall weighted averages |
| -61.7% | 27.1% |
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* 12 month |
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Source: market data; tables compiled by Barry Sergeant |
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