Iron Ore Juniors: Another Contrarian Idea | Australian Markets

Falling grades within the useful resource sector may matter more than you assume, and the impacts are occurring as we communicate.

Take iron ore:

The benchmark grade that almost all iron ore miners attempt to obtain is a 62% iron (Fe) content material.

However, the industry just lately introduced that it’s going to revise that DOWN to a 61% Fe benchmark.

Why does that matter?

Well, that is a symptom of declining ore grades and better impurities, as miners shift to lower-quality deposits.

While a 1% change may not sound like a lot, it’s going to influence metal manufacturing prices and the price shoppers pay.

Falling grades are one more issue driving up prices within the world financial system.

Mining Memo’s Take

For a long time, the 62% Fe grade was the anchor for world pricing, with Pilbara Blend Fines (PBF) performing because the bellwether.

However, provided that a lot of the Pilbara ore now falls under this 62% benchmark, the industry has been compelled to regulate its requirements.

The transfer to a 61% Fe baseline, efficient from 2026, displays the new actuality for iron ore mining.

While it’d sound trivial, it alters the fee profile for metal makers; primarily, decrease grades lead to larger metal manufacturing prices.

So, is there an alternative right here for traders?

Or must you keep away from iron ore stocks as they take care of lower-quality deposits?

If you had been going to make a basic guess on iron ore miners lifting, I might have taken benefit in the beginning of 2025, when sentiment was extraordinarily poor.

Like I prompt right here.

But since then, iron ore miners have rallied firmly, like FMG, which is up round 20% since I prompt it on your portfolio.

That means it’s essential to now be further selective.

So, that is what it is best to search for:

When it involves breaking into the iron ore market, it’s all about infrastructure.

Iron ore mining presents vital limitations to entry for junior mining stocks, given the huge CAPEX necessities to mine and transport ore.

Iron ore is a low-value, bulk commodity.

Transport and loading prices are far more essential in mine feasibility planning versus higher-value commodities like gold or copper.

That’s why I’d keep away from most iron ore builders in at present’s high-cost working market.

Then there’s the opposite large elephant within the room… Simandou in Guinea, West Africa.

Touted because the ‘Pilbara Killer,’ imminent manufacturing at Simandou looms as a vital menace to Australia’s world iron ore monopoly.

Especially provided that Simandou holds superior grades.

Next Comes Grade

For my readers, I just lately advisable an iron ore junior with vital benefits over its greater cousins within the Pilbara, like FMG, BHP or Rio.

Its iron ore mines have grades on par with the high-grade Simandou deposits in West Africa.

And that’s the important thing component.

High grades will keep its working margins aggressive and doubtlessly make it a lure for a potential takeover from a main iron ore miner seeking to increase their own falling head grades.

The backside line is that Australia nonetheless gives alternatives within the iron ore market.

The key benefit is that operators listed here are simply a stone’s throw from main Asian markets.

Plus, if China’s new mega dam project sparks a new wave of infrastructure development, as I detailed right here, this might give iron ore stocks a second wind through the years to return.

But to stack the percentages in your favour, make sure you give attention to these THREE essential standards:

#1 Grade

#2 Access to infrastructure

#3 Proximity to main steelmakers in Asia.

Until subsequent time.

All advice is basic advice and has not taken under consideration your personal circumstances.

Please search impartial financial advice relating to your own state of affairs, or if unsure in regards to the suitability of an investment.

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