Five Iron ore miners

Rio Tinto Limited

RIO Details
Sold stake in iron ore mine:Rio Tinto Ltd (ASX: RIO) has announced the plans to sell its Simandou iron ore project to China’s Chinalco, the world’s largest iron ore consumer. Simandou, in Africa’s Guinea is estimated to have the world’s largest untapped iron ore reserves with 2 billion tonnes of iron ore worth an estimated US$50 billion. Currently, Rio held 46.6% stake in Simandou. The group will receive $1.1-1.3 billion in terms of payment. Lately, the group has contacted regulatory authorities with regard to investigations on contractual payments totaling US$10.5 million made to a consultant providing advisory services on Simandou. Rio has cut guidance for Pilbara iron ore shipment for this financial year in the range between 325-330 million tonnes. September quarter produced 83.2 million tonnes and fourth quarter is expected to have 81.1 million tonnes. Meanwhile, RIO informed that it reduced its gross debt by $1.5 billion under cash tender offers announced in September 2016. The stock has a decent dividend yield, while we maintain a “Buy” on the stock at current market price of $ 53.73

 
RIO Daily Chart (Source: Thomson Reuters) 

BHP Billiton Limited

BHP Details
Solid performance during challenging year:BHP Billiton Limited (ASX: BHP) has rejected the criminal charges against the group and certain employees as filed by Ministerio Publico Federal of Brazil before the Federal court with regard to Samarco incident. On the other note, the group managed to cut down cost by 16% from FY15 in unit costs. The underlying EBITDA was reported to be US$12.3 billion and underlying EBITDA margin was 41%. The company reported a net operating cash flow of US$10.6 billion and a free cash flow of US$3.4 billion.
 

Productivity Gains and Cost Reduction (Source: Company Reports)
 
Going forward, the company expects to increase volume by 4% and deliver a further US$1.8 billion in productivity gains. The management guided FY17 petroleum production at 200-210 MMboe while that of copper is at 1.66 MT. The iron production is expected at 228-237 MT and metallurgical coal at 44 MT. The company proposed to invest US$5.4 billion in capital and exploration expenditure. At the end of September, BHP has four major projects under development in petroleum, copper and potash with combined budget of US$6.9 billion. We recommend a “Buy” on the stock at the current market price of $ 22.56

 
BHP Daily Chart (Source: Thomson Reuters) 

Fortescue Metals Group Limited 

FMG Details
Buying BC Iron’s stake in Nullagine iron ore mine:Fortescue Metals Group Limited (ASX: FMG) conducted its AGM on November 09, 2016 and fell 2.7%. FMG recently agreed to buy out BC Iron’s 75% stake interest in the Nullagine iron ore mine. The price is $1 and brings an end to a seven-year partnership. The mine was closed earlier this year because the cost of production exceeded the level at which it was possible to make a profit. The deal added 6 million tonnes to FMG’s iron ore capacity. The deal would help to boost production to its target range of 165-170 million tonnes in the 2017 financial year. The group’s September quarter highlights included shipments of 43.8 million tonnes of iron ore while cash production costs improved to $13.55 per wet metric tonne (wmt).
 

Debt Maturity (Source: Company Reports)
 
The group maintained its FY17 guidance at 165-170 mt shipped and US$12-13 wmt C1 cost. On the other hand, the group’s CEO Nev Power lately warned that the outlook for iron ore prices may decline into 2017. We recommend the stock as a “Hold” at the current market price of $ 5.43

 
FMG Daily Chart (Source: Thomson Reuters) 

Atlas Iron Limited

AGO Details
Improvement in shipment:Atlas Iron Ltd (ASX: AGO) reported an 8% rise in ore shipments for September quarter to 4.1 wmt as compared with June quarter. The production has increased by 4% to 3.79 wmt. The company reported a 3% decline in cash cost ($/WMT FOB). The net Atlas CFR sales price however has been reduced by 2% to $56/ WMT. Furthermore, the company repaid its debt to the tune of $15 million in October 2016 via term loan cash sweep mechanism.

 

Financial Position (Source: Company Reports)
 
The company reported cash of $95 million as at September 2016 with the increase attributable to positive cash flow generated from the Company’s operations. The group will conduct its AGM on November 21, 2016. We believe that the stock is “Expensive” at the current market price of $ 0.013

 
AGO Daily Chart (Source: Thomson Reuters) 

BC Iron Ltd

BCI Details
Selling stake in Nullagine iron ore mine: BC Iron Ltd (ASX: BCI) announced to sell 75% interest in the Nullagine Iron Ore mine in the Pilbara region to joint venture partner Fortescue Metals Group Ltd. The Nullagine mine was closed in December 2015, after iron ore prices slumped below US$40 a tonne. The same was kept on care and maintenance, with BC iron hoping the iron ore price would rise. As a consideration BC Iron will not receive any cash from Fortescue.  Instead, Fortescue would pay royalty on 75% of future iron ore mined from the Nullagine mine. Fortescue would pay 33% of royalty up to 7.5 million which offset the obligations they have been facing on including rehabilitation of the mine site once it reaches the end of its life. BCI however is no longer liable for the rehabilitation expenses and monthly costs of $150,000- $200,000 keeping the mine on care and maintenance. The company is boosting capital position and announced an entitlement offer to raise $25.5 million. Under the offer, BCI shareholders have been given an option to subscribe one new share for every one share held at issue price of $0.13 per share. The entitlement offer closes on November 11, 2016 unless extended or withdrawn. The cash balance was at $9.5 million as of September end. We recommend a “Hold” on the stock at the current market price of $ 0.14

 
BCI Daily Chart (Source: Thomson Reuters)

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