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As I have discussed before, junior iron ore miners (and FMG) generally have large proportions of lower grades iron ore to sell. Today AGO fesses up:
“Increasing supply is placing further downward pressure on 58% (iron) products, with significantly increased discounts to the 62% index being experienced for that product while the market adjusts to accomodate the increased presence of this type of product,” he said during a presentation in Sydney today.”
FMG has recently been selling these grades at a 12% discount to benchmark prices. Given today’s iron ore price is $92 and AGO has a widely accepted break even around $80…well…you get the picture.
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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
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