from the editor
there’s one thing you need to remember when you chat to these junior miners,” an iron ore exec once told me during a conference in Monte Carlo. This was in 2008 at the height of the commodities boom. “Some of them want to mine ore, but most of them just want to mine the market.”
Spot prices were hitting new record highs almost daily, and there seemed to be no end to China’s demand for iron ore – or the number of junior miners with exploration rights in wonderfully remote parts of the world.
The exec had a particularly ambitious dream: he wanted to build a new iron ore mine north of the Arctic Circle in Canada. In addition to the weather problems, which would halt shipments for a few months a year, the project also required massive rail and port infrastructure investments. (More than seven years and quite a bit of shareholder pain later, the first ore was shipped.)
Two things reminded me of this interview. Firstly, the China Iron and Steel Association warned that Chinese demand for steel, a bellwether of the economy, is contracting at an “unprecedented pace”.
And secondly, we saw the 15th listing of the year on the JSE this week. We’ve seen the most initial public offerings to the JSE to date this year since 2007, with the value of deals rising to the highest level since 2010, according to Bloomberg data. With the JSE still trading at historically high (and expensive) levels, it is understandable why many unlisted companies see it as a good time to raise equity at an attractive valuation.
On the other hand, the International Monetary Fund is expecting the economy to grow by 1.4% this year and only 1.3% in 2016, the slowest pace since 2009’s recession. Business confidence is at its lowest levels in 22 years.
Certainly a good time, then, to heed the iron ore exec’s warning and keep an eye out for those who are simply here to mine the market – and at top dollar, too.
Matter of fact In the 29 October issue, we erroneously reported that “Adapt IT presents a good buying opportunity at any level above R100/share, with projected upside to R141.50/share levels in the near to short term.” It should have read “…at any level above R10/share, with projected upside to R14.15/ share”. We apologise for any inconvenience caused by the error.