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Is Atlas Iron Limited a buy?

The Atlas Iron Limited (ASX: AGO) share price has performed terribly over the years.

Back in July 2011, Atlas Iron shares were trading for more than $4 but can now be snapped up for about 3 cents.

2017 wasn’t a great year for Atlas Iron either, with the company’s share price dropping from 5 cents in February to below 2 cents in December.

But lately it’s been a different story for Atlas Iron shareholders.

On 2 January the Atlas Iron share price gained more than 20 per cent and it continues to rise.

The Atlas share price gained another 10 per cent on Tuesday.

Other iron ore players, including BHP Billiton Limited (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG), also enjoyed gains on Tuesday.

It appears there is increased demand for iron ore as evidenced by data from Australia’s major iron ports.

The Pilbara Ports Authority in Western Australia’s north has stated that December saw several records broken.

“This includes a record monthly iron ore export total of 60.1Mt,” according to the port authority.

And Fairfax Media Limited (ASX: FXJ) has reported that iron ore “shipments to China from the Port Hedland terminal rose 11 per cent to 39.1 million tonnes in December from 35.2 million in November”, based on port data.

But Atlas Iron’s sharp rise in its share price when compared to others in the sector suggests investors are particularly enthusiastic about the smaller iron ore player.

Things have started looking better for Atlas.

In financial year (FY) 2017 Atlas reported a net profit after tax of $48 million, a significant improvement on the loss of $159 million the company reported for FY 2016.

It also seems Atlas’s lithium prospects may be influencing increased confidence in the company.

Atlas recently announced it had struck an agreement with Pilbara Minerals Ltd (ASX: PLS) in which Atlas will process and transport ore from Pilbara Minerals’ Pilgangoora Project.

2018 is certainly looking like a better year for Atlas, but those looking for exposure to Australia’s iron ore sector would do well to first consider the bigger players BHP Billiton and Rio Tinto.

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Motley Fool contributor Steve Holland has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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