The iron ore price is on the rise, reaching nearly $110 per tonne this month. This is the highest price seen since August last year. The increase in coronavirus infections in Brazil has caused supply concerns while demand is rising in China. The Chinese Government has vowed to increase spending on infrastructure construction to combat the economic impacts of coronavirus. Here, we take a look at 3 ASX iron ore shares heavily leveraged to this trend.
3 ASX iron ore shares to leverage the rising price of iron
Fortescue Metals Group Limited (ASX: FMG)
The Fortescue Metals share price climbed 10.4% last week on the strength of the iron ore price. One of the world’s largest iron ore producers, Fortescue operates in the Pilbara in Western Australia. The company reported record third quarter shipments of 42.3 million tonnes in the third quarter, 10% higher than 3Q FY19. Year to date shipments were a record 130.9 million tonnes. Fortescue had net cash of US$0.1 billion at the end of the March quarter compared to net debt of US$2.9 billion at the end of March 2019.
Mt Gibson Iron Limited (ASX: MGX)
The Mt Gibson Iron share price has climbed 12.7% this month as the iron ore price gains strength. Mt Gibson Iron has assets in the Kimberley and Mid West regions of Western Australia and reported iron ore sales of 1 million wet metric tonnes in the March quarter. Sales revenue totalled $82 million for the quarter. The company had cash and liquid investments of $402 million at the end of the quarter, and no borrowings. In FY19 Mt Gibson delivered a net profit after tax of $44.6 million in total iron ore sales of $230 million.
BHP Group Ltd (ASX: BHP)
The BHP share price is up 7.6% this month. BHP has an integrated system of five iron ore mines and four processing hubs in the Pilbara region of Western Australia. The miner produced 60 million tonnes (Mt) of iron ore in the March quarter and 181Mt in the nine months to the end of March. Full year guidance is for production of 242 to 253Mt of iron ore. As at 31 December 2019, net debt was US$12.8 billion, at the lower end of the company’s target range. Cash and cash equivalents were US$14.3 billion. This position, along with BHP’s low cost operations, means the company is resilient and expected to generate solid cash flow through the cycle.
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Returns as of 6th October 2020
Motley Fool contributor Kate O'Brien owns shares of BHP Billiton Limited and Mount Gibson Iron Limited. 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 Scott Phillips.
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