2 small players and 1 big rail company are moving into the Pilbara

Recent iron ore resurgence shines light on potential growers.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The revival of Western Australia iron ore exports was underlined again by the 33% year on year increase in ore exports leaving Port Hedland. The port handles about 20% of the world-wide seabourne export of iron ore, with China as one of its largest importers. The major miners, Rio Tinto (ASX: RIO), BHP Billiton (ASX: BHP) and Fortescue Metals Group (ASX: FMG), are all expanding production in the Pilbara.

With the higher iron spot prices now around $130-$135, earnings are forecast to be better, and the race is on to get other projects expanded and underway. Fortescue Metals Group's recommendation by UBS has been raised to a "buy" from "neutral" because strong earnings and investments from Asian companies will allow the company to pay down its heavy debt.

Fewer interest expenses means a bigger bottom line, and investors can look forward to decent earnings growth, which are already up about 20% over 2012.

Potential growers:

Atlas Iron (ASX: AGO) stands to benefit from higher prices and larger volumes it has achieved this year — a little over 9 million tonnes in 2013, but it currently has capacity of 10 million. Its share price hit a low of $0.69 in June, but now is up 58% to $1.09.

Rail transport company Aurizon (ASX: AZJ) is working to expand its networks into WA, and is developing a plan to operate rail and port facilities in the Pilbara in conjunction with Brockman Mining (ASX: BCK) and Atlas Iron. Presently at a feasibility study stage, it would integrate rail and port infrastructure, and give better port access to the two miners, allowing them to ship more ore at better transport costs.

Aurizon is up about 30% over the past 12 months, at $4.79, hitting new highs since listing in 2010.

Brockman Mining, formerly Brockman Resources, was trading at $0.05. It had a net loss of $66.3 million in 2013, but with increases in ore production foreseen, prospects for this year are better. Its currently proposed Marillana mine will be linked to the port by Aurizon as part of the plan that the miner and rail group have.

Foolish takeaway

Developments can be slow in mining, but they give investors enough time to read reports and look at data to see if the return is worth it for them. Don't just look for penny stocks. Demand stable earnings, good growth, and good management before committing yourself.

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »