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Iron ore stocks close December on a tear, but what looms in 2023?

Stock Markets Feb 03, 2023 12:30
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Iron ore stocks close December on a tear, but what looms in 2023?
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As the world considers green steelmaking and China’s economy reopens, iron ore stocks are in an interesting position.

This crucial raw material has emerged from a topsy-turvy year in the green, but where it lands next is anyone’s guess.

Faced with this volatility, emerging iron ore producers are choosing their next steps carefully. For some, it’s business as usual, while others are considering how they’ll meet growing demand for decarbonised production.

As such, the question remains — how will Aussie players respond to this ever-evolving market, and what will they accomplish in 2023?

Give me the elevator pitch

2022 was a turbulent year for iron ore stocks. The steelmaking commodity seesawed between the green and the red for the better part of a year before pricing improved in the December quarter.

That momentum continued into 2023 — iron ore futures reached new heights in January and kept miners optimistic. But what was behind the about-face?

We can’t talk about iron ore pricing without considering a major economic superpower: China’s December quarter was characterised by easing Covid restrictions and rising government support for the property sector.

For context, the world’s second-largest economy imports the vast majority of its iron ore to support the steelmaking industry, which, in turn, props up consumption in the property market.

So, as China comes back online and policymakers set the wheels in motion to support homebuyers and developers, traders are tracking a price hike.

Over January, Trading Economics reported that iron ore destined for major city Tianjin is fetching up to US$130 per tonne — the highest price in more than seven months — as China reopens its economy and the demand-side outlook improves.

But is where is the price headed? While growing appetite in China bodes well for iron ore stocks, analyst predictions are mixed.

Some see the iron ore price undergoing a slight correction in 2023 before stabilising in 2024, while others forecast a prolonged softening as the threat of a global recession looms large.

Either way, as the world's largest iron ore exporter (and second-largest producer), Australia remains a pivotal industry player, and Aussie stocks need to watch this space.

So just how did ASX-listed players perform over the December quarter?

In the spotlight: ASX iron ore stocks

Fenix Resources

Fenix Resources Ltd (ASX:FEX) sent off nearly 300,000 wet metric tonnes of ore from the Iron Ridge Mine in WA last quarter.

The iron ore stock also reduced its C1 cash costs to A$78/tonne and extended its hedge book to June 2023, covering 50,000 tonnes per month at A$173/tonne.

Looking at the financials, Fenix reported an increased operating margin of roughly A$38 per dry metric tonne and ended the year with A$48.8 million in the bank.

Fenix’s Iron Ridge Mine.

“The Fenix team continue to deliver exceptional performance, further reducing operating costs and increasing operating margins in the December quarter in the face of volatile market conditions,” chairman John Welborn stated in the company’s quarterly report.

“Fenix is now positioned with a unique advantage in the MidWest as a fully integrated mining, haulage and logistics company.”

Magnetite Mines

With a global mineral resource base now exceeding 5.7 billion tonnes, Magnetite Mines Ltd (ASX:MGT) spent the December quarter developing its flagship Razorback Iron Ore Project in South Australia.

The green steel player said project de-risking was a quarter highlight after it shifted towards a larger-scale initial production scenario.

Engineering and metallurgical studies will take place in the coming weeks, while Razorback’s optimisation studies are slated for completion before quarter end.

Overall, this work will feed into a simplified go-forward position, which will form the basis of a definitive feasibility study.

Surveys at Razorback West.

Akora Resources

Akora Resources Ltd (ASX:AKO) spent the final months of 2022 exploring its Bekisopa project — a high-grade, low-impurity iron ore asset in Madagascar.

Much of the quarter was focused on an infill drilling campaign, designed to enhance the direct shipping ore (DSO) resource at Bekisopa.

Drill core from Bekisopa.

Akora also completed a pivotal scoping study, setting the stage for its two-pronged development strategy. The first phase will involve a robust DSO project, while phase two will focus on a fines or high-grade concentrate hub.

The iron ore player ended the year with A$0.7 million to support work in 2023, including a mineral resource update and a pre-feasibility study.

Arrow Minerals

Over in West Africa, Arrow Minerals Ltd (ASX:AMD) laid the groundwork for exploration at the Simandou North Iron Project in Guinea.

The team completed the first stage of definitive agreements on New Year’s Eve, giving it the beneficial rights to an initial 33% interest in the project and paving the way for drilling this quarter.

Arrow is locked in on five high-priority, near-surface drill targets that could bear prominent haematite enrichment, and it’ll feed back to the market as the program gets underway.

In other news, the company received another A$300,000 cash injection after divesting its Strickland Copper-Gold Project in WA. It also completed a board restructure.

CuFe Ltd (ASX:CUF)’s JWD Iron Ore Project focused on processing and trucking this quarter, reflecting a slowdown in production to hedge against the falling commodity prices seen in previous months.

The iron ore stock sent off four shipments between October and December, working alongside the neighbouring C4 project to export 72,446 wet metric tonnes of ore.

The JWD production pad.

CuFe also closed the books on its Yarram drilling program, with results expected to feed into a maiden resource in the March quarter.

On the development front, the company is hard at work on its Tennant Creek mine planning scenarios, which consider ways it can produce DSO from the Orlando deposit to process at third-party facilities.

Hawsons Iron

Like CuFe, Hawsons Iron Ltd (ASX:HIO) slowed work on its namesake iron ore asset in the face of escalating global costs.

A revised bankable feasibility study is on the cards, focused on developing an 11-million-tonne-per-annum magnetite mine near Broken Hill in New South Wales.

Beyond the study, Hawsons also inked a binding agreement with Flinders Ports, opening the door to develop and operate a greenfield port at Myponie Point on South Australia’s eastern Spencer Gulf.

In late November, Hawsons galvanised its cash balance with an A$5 million institutional placement, issuing 62.5 million shares along the way.

Read more on Proactive Investors AU


Iron ore stocks close December on a tear, but what looms in 2023?

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