ANALYSTS have labelled Australia’s iron ore juniors as loss-makers, as the price of the nation’s key export continues to plunge.
Macquarie has downgraded its rating on BC Iron from neutral to underperform and has significantly cut its price targets for junior miners under its coverage, with a 25 per cent cut on BC Iron to 40c and a 20 per cent cut on Atlas Iron to 8c.
Both miners were trading lower in the Australian market today, after the price of iron ore again slumped overnight. BC Iron was down 1.9 per cent at 39.7c, while Atlas Iron was 5.3 per cent lower at 14.2c.
Iron ore, which was trading at $US135 a tonne at the start of the year, sunk 5 per cent lower overnight to $US54.50 a tonne.
The team at Macquarie said in its client note that incorporating the bank’s new iron ore and Australian dollar and US dollar forecasts had resulted in widening losses for Mount Gibson, Atlas Iron and BC Iron in 2015 and 2016.
“On our estimates, Mount Gibson, BC Iron and Atlas Iron are loss-making at the free cash flow level at spot iron ore prices and, with our forecasts for further declines in the price over the next six months, we expect the downward pressure on the mid-cap iron-ore producers to continue,” the bank’s resources analysts’ said.
The team said that with the exception of Grange Resource, all other mid-cap iron ore producers on its watch were expected to report earnings losses.
Source; The Australian
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