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Here’s a warning to all iron ore investors: Watch out below

Those investors who still believe the grass is greener on the other side for the iron ore sector might want to rethink their theory.

Overnight, the commodity took another hit, falling a further 2% to US$69.25 a tonne. It’s now lost almost half of its value since the beginning of the year – a time when it traded for a much healthier US$135 a tonne.

Indeed, the losses have been felt over the course of 2014. While the big miners, namely BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO), have lost 20% and 14% respectively, the junior miners have been much worse off. Given their higher cost operations and lower quality ore, companies like BC Iron Limited (ASX: BCI) and Arrium Ltd (ASX: ARI) have plummeted 89% and 91% each. Even Fortescue Metals Group Limited (ASX: FMG), Australia’s third largest player, has declined 54% amidst fears of its huge pile of debt.

Investors need to be aware that just because the shares have dropped an enormous amount doesn’t mean they won’t fall further. In fact, with some analysts suggesting iron ore could drop below US$60 a tonne, there is a very real possibility that investors could lose their entire investment in one of the junior miners if they are unable to spin a profit.

Rather than taking an unnecessary risk in the mining sector, investors would be far better off exploring the plethora of other opportunities currently presenting themselves in the market. For instance, take a look at the company our top investment advisor has just named his BEST dividend stock for 2015!

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Motley Fool contributor Ryan Newman (@ASXvalueinvest) does not own shares in any of the companies mentioned.

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