Over the past month or so, patterns among global portfolio flows were positive in every discernible subsector within listed mining stocks, with the heaviest net inflows recorded by the wide, and loosely defined, iron ore mining subsector.Once again, there is a minor qualification, in the form of the relatively small primary silver sector, which in turn is heavily dominated by silver superhero Fresnillo, now up by more than 600% from its low prices, seen in November 2008, with a market value now above USD 7bn, and supported further on Thursday as silver bullion prices made fresh nine month highs above USD 15.00 an ounce.Seen in aggregate, the broader listed global resources sector traded this week at levels not seen for seven months. In terms of composite price performance, silver names have delivered the best return over the past year or so, followed by specialist miners of zinc, copper, gold, uranium, tin, nickel, and iron ore. While listed iron ore stocks lag somewhat on this measure, the interest at this point lies in the rapid recapitalisation of the listed subsector, especially over the past month.This week saw Rio Tinto, the No 2 name in seaborne iron ore - after Brazilian supergroup Vale, and ahead of No 3 in BHP Billiton - agree to softer contract iron ore prices for 2009, in practice putting prices back to levels seen in 2007, and, indeed, higher than those levels. The reaction to the announcement indicates that the cuts were possibly smaller than had generally been anticipated.Rio Tinto's contract iron ore prices

US cents per dry metric ton unit

 2007

 2008

Change

2009

Change

 Pilbara Blend Fines/Yandicoogina Fines

80.42

144.66

79.9%

97.00

-32.9%

 Pilbara Blend Lump102.64

201.69

96.5%

112.00

-44.5%

The world's three, and totally dominant, seaborne iron names were already turning in super profits from iron ore during 2006, followed by further rounds of such profits in 2007 and 2008, with good signs of more to come. BHP Billiton's iron ore division EBIT (earnings before interest and tax) for 2007 was USD 2.7bn, on turnover for that division of USD 5.5bn, for an astonishing EBIT margin of 49.4%. The margin was maintained in 2008, but with EBIT rising substantially to USD 4.9bn.

During the first quarter of this year, Vale reduced its iron ore production by 27% to 49.8m tonnes, compared to the first quarter of 2008; pellet production was slashed down 73% to 2.9m tonnes. Even so, Vale's adjusted EBITDA from ferrous minerals, mainly iron ore, was reported as USD 2.2bn for the first quarter of 2009, compared to USD 2bn for the first quarter of 2008.Vale's USD 2.2bn EBITDA from ferrous minerals for the first quarter of this year comprised the vast bulk of its group EBITDA, at USD 2.3bn. With ferrous minerals revenues of USD 3.5bn for the quarter (including minimal contributions from ferroalloys and manganese), Vale's EBIDTA margin for ferrous minerals was 63%. The comparative figure for the first quarter of 2008 was a more modest 47%.

To what extent investor funds have been attracted to Vale, BHP Billiton and Rio Tinto in following iron ore's fabulous margins is almost impossible to quantify, given the diversified portfolio held by each of those mining houses. It cannot escape attention, however, that the three stocks rank as the top three mining stocks in the world, measured by market value.

Among specialised iron ore plays, Australia's Fortescue, the new player in seaborne iron ore, has witnessed a rise of more than 100% from lows for its stock price. Fortescue's market value slipped from a peak USD 31.7bn during 2008 to a low of USD 2.8bn, and has since recovered to around USD 6.2bn. Looking at 65 iron ore specialists, ranging from Ferrexpo to Mount Gibson Iron and Atlas Iron, it is notable that, on aggregate, stock prices have increased from lows by 168%, measured on a fully weighted basis.At the same time, it is crucial to note that these stocks currently trade no less than 75%, on average, below stock price highs, seen during 2008. Elements of value destruction remain very much clear and present, but the point is that investors are showing a keenness to restore some good portions of what had been involuntarily surrendered. Weak spots include North American names such as Cons.Thompson, Baffinland, Northland Resources, and Cardero Resources, which continue to lag.Larger integrated and diversified stocks, with interests in iron ore mining, and sometimes also downstream operations in steelmaking, have recovered by 150% from lows, and on average trade 54% below highs. On those numbers, the value restoration is fuller so far, for the likes of NMDC, Vedanta, Kumba Iron Ore, Labrador Iron, and Steel Aut. India, but some stocks in this classification remain depressed as well, as seen in Russian names Evraz, Severstal, and Mechel. Like their Indian counterparts in this game, Chinese names have been relatively cheerful on the stock pricing front, as seen in Minmetals, Hunan Valin, and Beijing Shougang.

The broader iron ore sector is no small enterprise. In terms of country production, China ranks as the biggest iron ore miner by far, with around 770m tonnes of the stuff dug out during 2008, followed by Brazil, mainly Vale, with 390mt, Australia with 330mt, India with 200mt, and Russia with about 100mt.

Selected iron ore names

THE BIG THREE

Stock

From

From

Value

price

high*

low*

USD bn

Vale

USD 19.18

-53.1%

118.0%

93.982

Rio Tinto

GBP 27.43

-57.1%

175.7%

63.354

BHP Billiton

GBP 14.28

-29.5%

95.2%

140.264

Big three averages/total

-46.6%

129.6%

297.599

Weighted average

 

-45.6%

115.7%

TIER II, PURE/DIVERSIFIED

Evraz

USD 22.58

-79.9%

510.3%

2.766

Minmetals

CNY 17.06

-51.2%

99.5%

2.678

Hunan Valin

CNY 6.47

-27.3%

99.7%

2.594

Severstal

USD 5.20

-80.5%

150.0%

5.240

Citic Pacific

HKD 17.20

-49.9%

369.9%

8.090

Vedanta

GBP 15.50

-41.4%

332.1%

6.866

Gerdau

BRL 15.45

-54.6%

79.7%

3.811

Steel Aut. India

INR 164.50

-9.6%

197.7%

14.270

Beijing Shougang

CNY 4.75

-20.7%

80.6%

2.063

Orissa Sponge

INR 350.05

-26.0%

525.1%

0.147

NMDC

INR 425.60

-3.3%

269.4%

35.438

CAP

CLP 12,015.00

-55.6%

81.8%

3.179

Pivdennyi HZK

UAH 8.000

-11.1%

31.1%

2.239

Anglo American

GBP 16.86

-52.9%

86.1%

36.215

ENRC

GBP 6.16

-59.8%

236.6%

12.688

CSN

USD 22.89

-55.3%

190.9%

18.161

Mechel

USD 10.53

-81.7%

311.3%

4.383

Kumba Iron Ore

ZAR 189.50

-45.5%

84.8%

7.514

MMX Mineracao

BRL 6.67

-69.6%

208.8%

1.010

ARM

ZAR 127.22

-58.6%

67.4%

3.346

Cliffs Natural

USD 26.00

-78.7%

120.3%

3.405

Usiminas

BRL 34.58

-62.4%

97.1%

4.340

Sesa Goa

INR 163.35

-24.7%

172.3%

2.701

Assore

ZAR 480.00

-43.5%

50.0%

1.653

Labrador Iron

CAD 28.53

-49.0%

66.8%

0.821

Magnitogorsk

USD 0.36

-75.0%

140.0%

4.023

Tier II averages/total

 

-48.8%

179.2%

189.642

Weighted average

 

-52.7%

154.3%

TIER III, DEVELOPERS & OTHERS

Fortescue

AUD 2.56

-80.5%

120.7%

6.219

Ferrexpo

GBP 1.62

-66.6%

652.3%

1.523

Aquila

AUD 4.15

-76.9%

118.4%

0.813

Mount Gibson Iron

AUD 0.77

-78.1%

302.6%

0.647

Murchison

AUD 1.58

-62.7%

229.2%

0.513

Cons.Thompson

CAD 2.98

-70.8%

267.9%

0.415

Atlas Iron

AUD 1.53

-63.0%

276.5%

0.363

Gindalbie

AUD 0.71

-62.0%

121.9%

0.287

Australasian Resources

AUD 0.64

-62.4%

146.2%

0.223

Northern Iron

AUD 1.29

-70.7%

152.9%

0.215

African Minerals

GBP 1.85

-7.6%

1952.8%

0.554

London Mining

NOK 14.70

-7.5%

194.0%

0.251

Baffinland

CAD 0.41

-88.2%

285.7%

0.085

Sundance Resources

AUD 0.13

-74.8%

85.7%

0.215

Cardero Resources

CAD 1.20

-65.1%

36.4%

0.063

Northland Resources

CAD 1.10

-73.7%

120.0%

0.109

Sphere Investments

AUD 0.60

-83.7%

215.8%

0.070

Admiralty Resources

AUD 0.03

-90.3%

262.5%

0.029

Giralia

AUD 0.67

-76.4%

131.0%

0.094

Sarda Energy

INR 139.85

-61.2%

179.7%

0.100

Red Hill Iron

AUD 2.30

-67.6%

130.0%

0.075

Strike

AUD 0.42

-84.7%

68.0%

0.043

Brockman

AUD 1.04

-64.9%

158.8%

0.110

Territory

AUD 0.22

-76.5%

201.4%

0.046

United Minerals

AUD 0.89

-68.4%

195.0%

0.108

Ferraus

AUD 0.25

-87.6%

138.1%

0.030

New Millennium

CAD 0.45

-76.2%

221.4%

0.053

Iron Ore Holdings

AUD 0.08

-79.2%

97.5%

0.004

Indo Mines

AUD 0.20

-82.8%

0.0%

0.013

Cape Lambert

AUD 0.30

-43.5%

90.3%

0.122

Great Northern

USD 83.02

-31.3%

108.0%

0.125

Beowulf Mining

GBP 0.02

-59.0%

166.7%

0.001

Centrex

AUD 0.27

-54.6%

125.0%

0.057

Grange

AUD 0.56

-77.5%

119.6%

0.051

Sandur

INR 415.35

-70.9%

140.9%

0.076

Nalwa

INR 584.95

-39.7%

30.0%

0.063

BC Iron

AUD 0.63

-64.9%

267.6%

0.030

Western Plains

AUD 0.42

-74.1%

186.2%

0.027

IMX Resources

AUD 0.23

-64.6%

43.8%

0.032

Flinders

AUD 0.06

-78.0%

100.0%

0.058

Iron Ore Holdings

AUD 0.50

-46.5%

420.8%

0.046

Mindax

AUD 0.48

-5.9%

146.2%

0.049

Aurox Resources

AUD 0.24

-79.7%

242.9%

0.037

Polaris Metals

AUD 0.17

-70.2%

142.9%

0.023

Haoma Mining

AUD 0.11

-52.2%

254.8%

0.016

Cullen Resources

AUD 0.06

-67.6%

120.0%

0.024

Adriana Resources

CAD 0.26

-76.4%

73.3%

0.016

Jupiter Mines

AUD 0.16

-56.8%

166.7%

0.030

Macarthur Minerals

AUD 0.90

-63.9%

34.3%

0.015

Talisman Mining

AUD 0.35

-48.5%

311.8%

0.021

Warwick Resources

AUD 0.14

-76.9%

80.0%

0.010

Ironclad

AUD 0.30

-77.3%

126.9%

0.009

Helix

AUD 0.09

-75.0%

80.0%

0.009

Maximus

AUD 0.03

-87.2%

7.1%

0.004

Venture Minerals

AUD 0.20

-62.5%

174.6%

0.016

Apollo Minerals

AUD 0.20

-61.0%

56.0%

0.014

Monax Mining

AUD 0.08

-77.4%

259.1%

0.004

Iron Mountain

AUD 0.08

-79.2%

97.5%

0.004

Cazaly

AUD 0.17

-75.6%

89.7%

0.011

Red Rock

GBP 0.01

-67.2%

173.3%

0.008

Renison Consolidated

AUD 0.00

-94.0%

200.0%

0.003

Coziron

AUD 0.03

-81.9%

6.7%

0.002

Centrex Metals

AUD 0.27

-54.6%

125.0%

0.057

Averages/total

 

-64.7%

189.3%

14.438

Weighted averages/total

-75.2%

168.2%

Overall averages/totals

-60.3%

185.9%

501.679

Overall weighted averages

-50.1%

130.2%

* 12 month

Source: market data; tables compiled by Barry Sergeant