The market for iron ore has been hot, especially heading toward the end of the year. Big mining companies with massive iron interests have seen a rally of investor support because of their low valuations, high earnings and big dividends.
But things are shifting. The demand for steel from China, the major consumer of iron ore, was dampened in September as that country slowed its forecast based on economic output and said it would lessen steel production during winter to help curb pollution.
Interestingly, other Asian countries including India and Vietnam look like they will take advantage of any price drop in iron ore and buy in. That should offset any lack of demand from China and put iron ore back where it was headed: up once again.
As any mining company will tell you, in order to mine ore, you need ready access to move the product to markets, a secure power source and a reliable labor force. Of course being able to access all these at low cost makes or breaks the project.
Leaders in iron ore mining are typically large companies with part of their interests tied to iron ore production. They likely mine other metals or develop petroleum etc. For really big returns, and in this particular climate, consider looking at early stage companies with strong economics.
Why juniors? They are flexible and able to move quickly to scoop up opportunities. They don’t bear large overheads and they can shift when needed. Obviously they carry more risk than the BIG mining companies, but the returns can be outstanding.
