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.
Today, The Age reports Western Desert Resources Ltd (ASX: WDR) has voluntarily entered administration after failing to renegotiate funding with investment bank Macquarie Group Ltd (ASX: MQG).
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the price of the steelmaking ingredient drops below A$90 per tonne for more than 20 consecutive days, the offer can be withdrawn.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.
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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.
