Iron ore looks like it will finish a tumultuous year on something resembling a high, as Fastmarkets 62% prices soared by more than five bucks to US$116.06/t on Thursday.

Premium 65% fines were also fetching US$132.40, with the price moves setting off a chain of buying on the ASX today.

Fortescue Metals Group (ASX:FMG) finished just shy of $19 a share with a 0.96% gain, while BHP (ASX:BHP) shares were up 1.82%, Champion Iron (ASX:CIA) rose by 5.53%, while MinRes (ASX:MIN) was up 2.04% and Grange Resources (ASX:GRR) was 2.29% higher.

Fastmarkets reporters said market sources suggested there was more positivity over long term iron ore demand, with some steel production curbs also expected to ease in Tangshan with China now virtually certain of hitting its goal of restricting steel output to sub-2020 levels this year.

Reuters said a government consultancy on Wednesday tipped Chinese steel demand could be lower in 2022 than 2021, but that consumption from infrastructure and automobile markets would be strong.

That would potentially limit damage from collapsing prices, new builds and sales in the struggling Chinese property market.

“Since targets for crude steel output have now been met, some mills are resuming production and profitability is relatively good,” Huatai Futures wrote in a note quoted by Reuters.

Dalian iron ore futures for May delivery were up 1.65% at 4.35pm AEDT, raising the prospect of further price moves for the headline commodity.

Gold prices also flirted with the US$1800/oz barrier overnight, sending precious metals stocks climbing. Northern Star Resources (ASX:NST) was up 5.59% to $9.45, with AngloGold Ashanti (ASX:AGG), Newcrest (ASX:NCM) and De Grey (ASX:DEG), which released some nice hits from its Hemi deposit, also bringing the gains.

Alkane Resources (ASX:ALK) was a clear standout after announcing a couple of 900m long copper-gold porphyry hits from its Boda discovery in New South Wales.

The materials index was up 1.2%.

 

Monsters share price today:


 

 

IGO-Western Areas deal overpriced

The ink is barely dry on IGO’s $1.1 billion cash offer for its nickel rival Western Areas (ASX:WSA) and analysts have had their say.

The prevailing view is that the deal was overpriced, a sure sign of the heat in the large cap resources space.

Market watchers have also suggested the extreme premium IGO (ASX:IGO) has offered – 35% above WSA’s share price before news of the potential takeover reared its head – could price other suitors out of the market.

WSA’s share price is already tracking above the $3.36 a share offered by IGO in the scheme deal, rising 2c or 0.6% to $3.44 today.

BHP and Andrew Forrest’s Wyloo Metals, who have been tussling over Canadian nickel explorer Noront Resources in recent months, are the two potential sharks hiding in the water, but analysts have made clear IGO has already paid top dollar.

“There is strategic rationale with consolidating WA Nickel sulphide producers, and while we see IGO as the natural owners, the company has overpaid for WSA, in our view,” RBC’s Kaan Peker said.

“Incorporating the transaction has reduced our price target by 50¢ to A$9.75/sh, with the transaction exected to be FCF accretive in FY24.”

“We retain our Sector Perform rating.”

Peker said the deal implies a 9x EBITDA multiple, compared to 7-8x for WSA’s peers and 5.5x compared to its historical average and a long-run nickel price of US$9.40-9.80/lb, above the current US$8.70/lb spot price.

IGO-WSA share prices today: