Monsters of Rock: Iron ore is charging again and it's good timing for Fortescue

Iron ore looks poised to cross the US$120/t again before the end of the year, as prices flirted with the mark on Friday.

The most traded January contract on the Singapore exchange hit US$127.95/t before coming back to US$125.45/t, a gain of 4.65%.

News out of China suggesting more easing of lending policies would take place, calming concerns about waning steel demand from a structural slowdown in that country’s economy.

China reduced its one year loan prime rate by 5 basis points from 3.85% to 3.80%.

Capital Economics chief Asia economist Mark Williams said the overall impression was monetary policy was being eased in China “but not dramatically”.

“We expect a further 45bp of cuts to the One-Year LPR during 2022,” he said. “This would represent a stronger monetary policy response than most currently anticipate – the consensus prior to today’s move is for the LPR to remain on hold for the foreseeable future.”

ANZ senior China strategist Zhaopeng Xing said the fact the 5 year loan rate was left unchanged, however, suggested China would not use its under water property sector, a key end market for steel and iron ore, to stimulate its economy.

Fastmarkets MB reported prices up US$3.54/t to US$119.60/t for benchmark 62% fines on Friday.

Fortescue Metals Group (ASX:FMG) shares were up 2.53% to a three month high of $19.46.

On top of the positive news about the iron ore price, FMG’s Fortescue Future Industries green energy arm also announced it had built its own electrolyser.

Canadian high grade producer Champion Iron (ASX:CIA) was the other big iron ore miner to move, rising 2.42%, while Rio Tinto (ASX:RIO) was up only 0.2%, having fallen into the red in the morning after announcing former McKinsey boss Dominic Barton as the Anglo-Australian miner’s new chair.

Miners share price today:

Gascoyne gets back to work

Gascoyne Resources (ASX:GCY) is recovering from its taxing takeover of Firefly Resources by getting back to work at the Dalgaranga gold project.

It had been a relatively straight-forward process until Peter Cook’s Westgold (ASX:WGX) stepped in with an offer to take out Gascoyne and its prized Dalgaranga gold mill, but only if the Firefly merger didn’t go through.

The issue was the ball was always in Firefly’s court, the only party with termination rights, meaning that when Gascoyne’s board belatedly endorsed the Westgold bid it was all over red rover.

Gascoyne is back in action with a new $20 million debt facility from major shareholder Deutsche Balaton to back new MD Simon Lawson (the former Firefly chief) and his efforts to revitalise the Dalgaranga operations.

Along with the added financial strength the refreshed Gascoyne revealed a series of high grade drill results from near mine resources within 5km of the Dalgaranga mill, with a new strategy to aim and unlock higher grade sources close to the plant to improve the operations.

“Securing this new facility with the Balaton Group provides us with a less restrictive set of debt terms, additional working capital and the ability to put in place gold and diesel fuel hedging on Gascoyne terms,” Lawson said.

“As the Company’s largest shareholder, the Balaton Group are clearly demonstrating their support of our plans with this important debt facility allowing Gascoyne’s management team to deliver on the strategy of bringing higher grade ore to the low-cost Dalgaranga gold processing plant.

“We have separately updated the market today on some important near-mine exploration activities which demonstrate the opportunities within a 5km radius of our 2.5Mtpa processing facility.”

“This debt facility will help us to unlock those opportunities and accelerate our near-term growth strategy,” Lawson said.