1) This is a surprise to some, with iron ore recovering to nearly $ 200 per ton.
no kidding. It was last week that I saw the headline “Iron ore may never come out for $ 200” in the mainstream media headlines.
Then, one week later.
I beg you. Do not remove clues from such mainstream chinpunkanpun.
I saw another article that more supply is being supplied to the market from a new BHP mine called South Frank.
Actually not. South Flank is an alternative mine for BHP. It only stabilizes production. There are no new tons on the market.
Where are you now?
One woman who knows something about it is Elizabeth Gaines.
Senora Gaines is President of Fortescue Metals.
Is Australian Financial Review Report: Report:
Fortescue’s CEO sees the market conditions that have pushed iron ore prices up for some time, despite China’s recent efforts to lower iron ore prices from record levels. Yes.
She said steelmaking has returned to pre-pandemic levels in other parts of the world, while strong demand from Chinese steelmakers is rising.
“On the supply side, most producers are investing to replace depleted mines, so we see little in terms of additional tons,” Gaines said.
Wait a minute! Of course she would say … she’s the boss of an iron ore mine.
That’s right. You can be skeptical.
But Senora Gaines said the same thing, but iron ore first shocked virtually everyone over $ 200. I trust her.
There are also data points to support this. This is a recent tweet by analyst Robert Lenny.
Large miners are still refusing to make large investments in capital investment here. Last time it burned too much.
And their investors don’t want them. They want a dividend!
But every day, miners also run out of reserves.
This is creating interesting dynamics over the next few years. Iron ore can certainly stay high over the long term.
Today, labor shortages are becoming more complex in Western Australia. Where do the staff come from when large miners try to grow on a large scale?
If demand is maintained, supply will not be flooded immediately.
This is a compelling case for holding iron ore stock. The price is disappointing.
And the miners who can dig it up and ship it right away are flooded with a big wave of cash flow.
There are no immediate plans to sell shares in Fortescue or Rio Tinto. Dividends will soon fall.
I like the fact that everyone is skeptical about prices. That means that there are still many people who can buy it.
The junior section also started to look interesting.
There are quite a few projects that did their first project evaluation when iron ore was around US $ 150. It looks even better when it’s close to $ 200.
2) How about gold? Some stocks look very strong here.
It was also surprising how sensitive the rise in gold stocks has been since it bottomed out in February or March.
I stuck out my neck and wallet and started shopping around that time. How about now?
Suddenly it feels too easy and obvious.
Don’t get me wrong. I’m not recommending you to sell gold stocks.
But now you shouldn’t be surprised if you feel a little depressed. The market is always trying to fool us.
As hinted at above, there is also a wildcard of Western Australia’s labor shortage. Some gold miners have lowered production guidance, citing this as a factor.
This is a problem for investors.
You can take a gold position-hoping it goes up-correct, but if the gold miner still misses the goal, you’ll get caught and lose money. So far, I’ve seen Red 5 and St Barbara hit like this.
You also need to know a little about managing each stock. Some gold companies have a habit of creating targets and then missing them.
Usually, the subject is often too ambitious in the first place. The stock market hates disappointment as much as uncertainty.
How to track such a slightly intangible thing? Ask your colleague Brian to do it.
He tracks all Australian gold miners and runs a gold fund. See his latest commentary on the gold sector here.
nice to meet you,
Editor, Daily Reckoning Australia
Postscript: Find the easiest way to start investing in gold in Australia. In fact, it’s as easy as buying a book on Amazon. Click here to read the free report.
Where is the action? — Changes in iron ore prices
https://www.dailyreckoning.com.au/iron-ore-and-gold-where-the-actions-at-iron-ore-price-remain/2021/06/01/ Where is the action? — Changes in iron ore prices