11/06/2009 - 00:00

Investors rally behind iron ore juniors

11/06/2009 - 00:00

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THE state's iron ore juniors are predicted to reap the rewards from the collapse of the Rio Tinto and Chinalco deal, with Chinese investment likely to flow to emerging iron ore producers.

Investors rally behind iron ore juniors

THE state's iron ore juniors are predicted to reap the rewards from the collapse of the Rio Tinto and Chinalco deal, with Chinese investment likely to flow to emerging iron ore producers.

While the full impact of the broken deal and the merger of Rio and BHP Billiton's Western Australian iron ore assets have yet to emerge, investors took advantage of the news, judging by share price movements in some iron ore stocks.

On the day the news broke, shares in Pilbara iron ore stocks increased, with Atlas Iron up 4 per cent, BC Iron surging 39 per cent on a double dose of good news, and Fortescue Metals Group up 14 per cent.

FMG executive director Graeme Rowley took advantage of the share price hike, pocketing $603,230, or around $3.01 a share, from a share sale on the day.

The day before, Mr Rowley netted $2.36 million from selling shares at $2.95 each.

An FMG spokesperson said the share sales were for personal reasons.

Even shares in iron ore miners in the Mid-West region picked up with Murchison Metals up 11 per cent while Mount Gibson Iron gained 9 per cent.

President of the Australian China Business Council Duncan Calder said while China was disappointed over the collapse of the Chinalco deal, there remained a chance the implications could prove to be in Australia's best interest.

"I think it's a positive for the second tier of iron ore producers in Australia and emerging producers because China is strategically motivated to want to support alternative supply chains and alternative sources of supply," Mr Calder told WA Business News.

"The collapse of this deal improves their prospects of getting a hearing and a supporter out of China.''

However, Mr Calder added there was a risk that China may become disenchanted with Australia and direct funding towards projects in other countries but he hopes the overall strength of the relationship between both nations will override that urge.

"There may be some instances or some deals that take a different trajectory now than they would have done previously but conversely some deals may receive impetus," Mr Calder said.

"It is easy to see companies like FMG, Gina Rinehart's company, Brockman Resources, Australasian Resources, BC Iron and many others will profit from this.

"It could be an opportunity which increases a company's prospects for funding for the development or further development of their projects."

He said there were differing views emerging from China following Rio's move away from Chinalco, with a feeling from some that Rio's actions were dishonourable while others were saying it was just business.

"Most of all China needs resources and Australia is a low cost, politically secure, competitive supply source for iron ore with whom there are strong sound and political connections," Mr Calder said.

"China is not going to spit the dummy and walk away from Australia."

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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