On Friday, the iron ore price dropped to just $US83.60 per tonne, representing a fall of nearly 40% since the beginning of the year.
All-of-a-sudden Australia’s most lucrative export – which the government’s May budget assumed would average $US100 per tonne – is pushing junior and mid-tier miners out of business.
Western Desert isn’t the first (and definitely won’t be the last miner!) to suffer from the falling spot price of iron ore. As Motley Fool analyst Mike King wrote this morning, the company’s decision, “follows the collapse of Termite Resources – 51% owned by ASX-listed IMX Resources Ltd (ASX: IXR) in June this year.”
It’s clear. Investing in junior iron ore miners is a very risky thing to do with your money.
Further down the cost curve (but not much further), miners such as Atlas Iron Limited (ASX:AGO), Grange Resources Limited (ASX: GRR), Gindalbie Metals Ltd. (ASX: GBG) and BC Iron Limited (ASX: BCI) are likely sweating over the downwards trend of the iron ore price.
The latter, BC Iron, recently launched a takeover offer of Iron Ore Holdings Ltd. (ASX: IOH). However, if the price of the steelmaking ingredient drops below A$90 per tonne for more than 20 consecutive days, the offer can be withdrawn. Friday was the first day it reached such a level.
3 high-risk resources stock picks from our top analyst – Yours FREE!
Whilst depressed iron ore prices will continue to hurt high-cost producers long into the future, major low-cost miners such as Rio Tinto Limited (ASX: RIO), Brazil’s Vale SA (ADR) (NYSE: VALE) and BHP Billiton Limited (ASX: BHP) will continue to increase their share of the global market – something China is likely to be very nervous about.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of February 15th 2021
Motley Fool Contributor Owen Raszkiewicz is long Dec 2017 $47 Warrants in Rio Tinto Limited.
- ALL ORDINARIES finishes higher Monday: 10 shares you missed – October 30, 2017 4:44pm
- Are these the secrets behind Australia’s best ASX investors? – October 30, 2017 3:43pm
- My Aussie Share Market Investing Do’s of 2017/2018 – October 30, 2017 1:13pm