Small iron ore plays to get a boost from big miner’s silver shower
Silver rains from the iron ore majors over the coming weeks will increase investor interest among smaller players in Australia’s most profitable mining industry.
BHP (ASX: BHP), Rio Tinto (ASX: RIO) and Fortescue Metals (ASX: FMG) are expected to pay massive dividends when they report half-yearly and annual profits inflated by record prices for steel material.
With this positive news for shareholders of major producers of a mineral that refuses to retreat below US $ 200 per tonne (despite repeated forecasts of a decline), there will also be a ripple effect as investors hunt down the next crop of winners.
There is a risk of late arrivals to the iron ore festival if prices fall after a three-year boom, but the stocks most at risk are existing producers, while small producers and explorers have not. seen their actions over-inflated by yield hunters. .
But there is also an upside risk that the price of iron ore will remain high for longer than it has been in previous cycles thanks to the unique characteristics of strong global economic growth following the slowdown in the economy. COVID-19 and the continuing shortage of supply, particularly from Brazil.
Credit Suisse, which had forecast the benchmark price for high-grade ore (62% iron content) to drop to US $ 149 / t, last week raised its price forecast for the rest of the year to US $ 179 / t because demand for steel, especially in China, continues to exceed expectations.
“In 2022, we believe that the global iron ore market will remain reasonably tight and improve our forecasts to 179 USD / t against 149 USD / t this year and to 144 USD / t against 120 USD / t next year”, the investment bank said. in a note entitled “Still going strong in 2022”.
Smaller iron ore is on the sidelines
The challenge for investors interested in iron ore is that industry news is dominated by major producers leaving emerging players on the sidelines although many have solid stories to tell, such as:
Fenix Resources (ASX: FEX) may be small but has a significant advantage over most other iron ore producers.
Fenix produces high grade ore that attracts a premium above the already inflated benchmark price. An overview of what the grade means in iron ore was contained in Fenix’s June quarter production report released earlier this week, in which the company said it shipped 281,000 tonnes of ore, with a operating margin of A $ 127 per tonne.
Added to Fenix’s early shipments earlier this year, June quarter exports from its Iron Ridge mine in WA’s mid-west mean the company sold 500,600 t of 62.5 percent ore in four and a half months to generate a $ 66 million in cash.
Despite having a modest resource of only 10.5 million tonnes of ore, Iron Ridge will have a short but profitable lifespan thanks to its cash-funding work on expansion options such as the Ulysses deposit. and Iron Ridge Extended.
A strong balance sheet means Fenix’s board of directors is already talking about capital management, code for a share buyback, which is why the company’s share price has risen sharply over the past six years. weeks, adding $ 0.13 (46%) to $ 0.41.
Red Hill Iron
Red Hill Iron (ASX: RHI) has been on the sidelines for so long that few investors have heard of it, but he’s one of ASX’s best-connected little explorers, with his foot on a slice. of a potentially world-class iron. ore development.
The Plum asset at Red Hill is partially owned by the Pannawonica iron ore project located in the heart of the Pilbara region in WA with Rio as a neighbor.
Besides valuable land holdings, Red Hill has impressive partners including AMCI (American Metals & Coal) and Chinese Boasteel.
A number of studies have been done over the past decade on how to expand some of the vast resource base with a new attempt now underway that helps explain why low-traded stocks have risen rapidly since the last decade. start of the year, up $ 0.83 (307%) to $ 1.10, valuing the company at $ 65 million.
In 2008, during the last iron ore boom, Red Hill was a mini star, hitting a record price of $ 6.58, before falling long to $ 0.12 early last year.
It is an exaggeration to describe CZR Resources (ASX: CZR) as the rebirth of the famous Atlas Iron, however, it is easy to see why this description could be applied to a stock planning a series of small iron ore mines with the old one. Atlas Managing Director David Flanagan, President.
For newcomers to the iron ore deposit, Atlas was a star of the latest boom and a forerunner in the development of small, largely neglected deposits that were solidly profitable in times of high ore prices.
Atlas’s starting point was the Pardoo mine near BHP’s shelved Goldsworthy operations, followed by other mines, until it ended when the price of ore plummeted, as did Atlas which has been consumed by Gina Rinehart’s Hancock Mining group.
Flanagan’s return is with a plan for CZR to start a small mine on an outcrop called Robe Mesa in Western Pilbara, potentially exporting via the port of Onslow. There are other assets in the business, all of which are joint ventures with WA’s main (and wealthiest) prospector, Mark Creasy.
A truly modest stock player, CZR has gone from $ 0.02 to $ 0.011 since the start of the year, but a recent $ 7 million fundraiser will keep the company moving forward as Flanagan and Creasy start the exploration.
Macarthur Minerals (ASX: MIO) long-standing plans to develop the Moonshine magnetite project near Giles Lake in central Washington state have been frustrated for years by its remote location and the need for massive investment in processing to produce high value iron ore concentrate.
Moonshine remains a possibility going forward, but the immediate plan is to move quickly to a small drop-ship (no processing) project based on the higher grade Ularring hematite deposits.
A series of recent developments, including a request for additional land for processing equipment, and a rail transport agreement with Pacific National to deliver up to 400,000 tonnes of material per year to the Port of Esperance.
These moves have rekindled interest in the stock which has risen from $ 0.10 (25%) to $ 0.50 in the past three weeks.
Successful crushing trials on drill core from Akora Resources (ASX: AKO) Bekisopa iron ore project on the island of Madagascar in the Indian Ocean have sparked interest from the company, which is considering develop a mine producing high quality steel raw materials.
What tests have shown is that the Bekisopa material only needs to be reduced to 3mm to provide a 62% iron benchmark product, while grinding to 2mm produces a product. 64% iron.
Akora said the 2mm material will form the basis of a resource estimate he’s working on.
The title has yet to grab the attention of most investors, although Madagascar is home to several large mines and Bekisopa outcrops grading up to 66% iron make it a prime target for future developments.
In the market, lightly traded Akora sits at around $ 0.26, valuing the company at $ 12 million untaxed.