Report by Global Mining Research

Iron ore prices recently bounced off US$100/t, raising the question whether this represents a pause in the correction, or perhaps early signals that the price cycle is restarting. Sentiment continues to focus on broad demand risks especially in China, nevertheless Chinese crude steel production continues to annualise at +1Bt/yr, with the rest of the world’s demand recovering. David Radclyffe believes investors are getting close to an opportunity to start accumulating iron ore stocks; iron ore producers trade on a prospective 2023 FCF and dividend yield of 9% and 8% respectively. David’s preferred exposures are Vale, Fortescue Metals Group and Labrador Iron Ore.

Report by Global Mining Research

Despite uncertain Chinese growth rates and hence iron ore demand, along with rising inflation and the Russo-Ukrainian war, David Radclyffe believes there may be more time to stay invested in the iron ore sector. With FCF yields remaining high for pure plays and diversifieds (~14%), investors should look for strong dividend yields (~9%) and cash returns this year. The big global diversifieds continue to offer better value than the pure plays, with Vale the preferred single entry, followed by Rio Tinto. For pure plays, David’s preferred exposure is Fortescue Metals Group, a non-consensus call.