5-Year High Iron Ore Prices Look to Revitalize Mining Sector
FN Media Group Presents Microsmallcap.com Market Commentary
New York, NY – June 5, 2019 – Mining companies across the industry are looking forward to a strong year as prices for various commodities continue to rise. Industrial metals in particular, such as iron ore, have broken records as prices surged to multi-year-highs. Iron ore miners such as Champion Iron Ltd (TSX:CIA) (OTC:CHPRF), Vale SA (NYSE:VALE), Cleveland-Cliffs Inc (NYSE:CLF), Labrador Iron Ore Royalty Corporation (TSX:LIF) (OTC:LIFZF), and Delrey Metals Corp (OTC:DLRYF) (CSE:DLRY) are just some of the companies well positioned to take advantage of this change in the market.
Many different commodities have seen their prices jump so far in 2019. Precious metals, such as gold, silver, and for a time, palladium, have all seen prices surge in the first quarter. However, few could have guessed that industrial metals have seen some of the largest price spikes so far in the year, with iron ore reigning supreme in this regard.
The Growing Appeal of Iron Ore Miners
Investors have traditionally paid more attention to mining companies that have focused on more prestigious, precious metals, such as gold and silver, or rare, niche minerals. Miners that extract industrial metals, however, haven’t enjoyed a similar level of attention, despite the essential role they play in the global economy.
After the tailings dam disaster in Brazil and cyclone-related disruptions in Australia, iron ore will be undersupplied in the near term causing prices to shoot up. This recent turn of events has made iron ore producers far more desirable in the eyes of analysts and investors. While major iron ore miners are expected to benefit from increased prices and the overall market enthusiasm, many less-well-known, small-cap miners are poised to take advantage of this development as well.
Delrey Metals Corp (OTCPK:DLRYF) (CSE:DLRY) holds a unique position in this regard, with their signature Four Corners Project based out of western Newfoundland. While other valuable metals like vanadium and titanium were found at the site, metallurgical samples of highly concentrated iron deposits in the area have peaked the ears of analysts and investors alike.
In conjunction with iron ore’s meteoric rise in price, the sampling and future drilling just announced could be a sign of good things to come. Delrey Metals Corp’s (DLRYF-DLRY) President and CEO Morgan Good went on to say that the company is “delighted with the recent movement of iron prices to more than $100usd/ton making new 5 year highs. Other companies such as Champion Iron Ltd, and ML Gold with their iron assets in eastern Canada, have both seen a dramatic appreciation to their share prices and valuations of late, which simply cannot be ignored as the iron sector continues heating up.”
While the company still intends to focus on energy metals such as vanadium, which are present at the Four Corners Project, the surge in iron prices has given Delrey Metals Corp. (DLRYF-DLRY) even more confidence in their project due to its positive metallurgy and historic high grade iron showings.
The Situation of the Global Iron Market
Iron has surged by over 40 percent since late 2018, with prices having just recently broken the $100 per tonne price point hitting a high of $108. Passing a record not seen in over five years, this rise is due to a variety of different factors.
One main reason contributing to this rise has been due to supply shortages out of Brazil. The world’s largest iron ore producer, Vale SA (NYSE:VALE), saw one of it’s biggest dams collapse in late January. With hundreds dead and billions of dollars of damages done to the environment, the Brazilian government stepped in to shut down many less-than-safe facilities. Since then, the company has said that these setbacks have taken out 93 million tonnes of iron ore out of the global market.
Other factors, such as poor weather in another major iron producing region, Western Australia, has also played a role in iron’s surge in price. With demand for the industrial metal remaining strong amidst these crucial supply shortages, investors have begun eyeing alternative iron-producing locations.
One of the most promising iron-producing regions in North America right now happens to be Newfoundland and Labrador. Already the largest producer of iron in the country, the federal government has already recognized the untapped potential of the provinces iron reserves. Premier Dwight Ball has already stated that the government is planning to “double the current level” of output.
As such, the region has seen an influx of mining companies looking to tap into these untouched iron reserves. Labrador Iron Ore Royalty Corporation (TSX:LIF) (OTCPK:LIFZF) is one of the oldest iron miners in the province, having been around for over 81 years thanks to exclusive mining rights in Labrador West.
Other miners, such as Champion Iron Ltd (TSX:CIA) (OTCPK:CHPRF), have recognized the region’s potential. Paying over $200 million to buy out a neighboring iron mine from the provincial government, miners are willing to pay significant sums in order to carve a piece out of Eastern Canada’s wealth of iron deposits.
Overall, iron prices show little signs of slowing down as experts around the world prepare for what has quickly become on the most drastic iron shortages in recent history. Lourenco Goncalves, industry expert and CEO at Cleveland-Cliffs Inc (NYSE:CLF), said that “What we are seeing in the world right now is the biggest pellet shortage that you could not have imagined what would happen.”
Further Mining Developments
Champion Iron Ltd, made news in the mining world in May when it won the rising star company award. Given out at the 2019 S&P Global Platts Global Metals Awards, the company was singled out as a big mover in the Canadian mining industry.
With their iron output having already plummeted in recent months, Vale SA ended up issuing a warning about another potential dam break. Their Gongo Soco mine in Brazil was under threat of collapse, with local residents having already been evacuated. While Vale said the risk of an outbreak has diminished, analysts and investors are still worried about more potential collapses.
Cleveland-Cliffs Inc. announced earlier in the year that they were planning to issue C$750 million in senior notes. The company intends to use these proceeds to pay off some of their other bonds as well as other corporate expenses.
Posting their financial results for the first quarter of 2019, Labrador Iron Ore Royalty Corporation reported modest growth in comparison to the first quarter last year. Growing from $33.8 million to $38.5 million in first quarter revenues, investors and analysts were satisfied with what these results as the stock price shot up.
Iron ore prices should continue to remain strong and is being supported by the increased demand from the steel industry. Also, the ongoing trade war between China and the U.S. is expected to have a positive impact on the price of iron ore.
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