Is US $200 per Tonne Iron Ore Price Possible? — City Index UKJanuary 11, 2013
LONDON–(Marketwire – January 11, 2013) – City Index UK — Yes. Anyone outside of the Australian investment scene can be excused for their lack of interest in the price of iron ore. With that in mind, please read on. In Australia, the iron ore price is a measure of national health. The nation’s richest person Gina Rinehart derives the majority of her wealth from iron ore assets. Rinehart is also the richest woman in the world. Australia’s Pilbara region is home to one of the most attractive geographies known to iron ore miners — not only are there huge deposits of high grade ore but suitable infrastructure and proximity to Asia ensures the commodity can be easily commercialised. Iron ore is used in the manufacturing of steel and the world’s largest steel factory — China — continues to produce near record high levels.
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So what’s the fuss about? Iron ore is just one single commodity but it has statistical significance to the Australian stock market. BHP Biliton for example is the largest single exposure on the Australian ASX200 index and by a large factor. It generates around half of its earnings from its iron ore businesses. Rio Tinto — another key index constituent — generates more than three-quarters of its earnings from iron ore. Fortescue Metals — with a market capitalisation of around US$15.5bn at the time of writing — is a pure play iron ore producer who has returned an average total shareholder return, annualised at 92.5% over the past ten years to shareholders.
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