I totally agree with you on the management of RIO and BHP. It simply does not make sense. All 3 companies are in deep trouble. What is the purpose of have 100% of $0?
Excellent commentary as long as you don't mind either blatant lying or laziness. Sanmarco has been in operation since 1977 not for 2 years. The death count is higher but the number missing has been reduced and that was a week ago so why he felt the need to give faulty numbers is bizarre because any way you look at it one or more fatalities is not good. Looks more like someone who invested in RIO and would prefer you buy them vs. their competitors. He doesn't mention that RIO's lame lawsuit was thrown out of court. Vale should be suing RIO for defamation and losses on the whole BMG mess.
FBEC is the stock to watch if you like high risk high reward plays. This little known company makes hemp energy shot and recent press is telling us that there are some big things coming.
So what about Vale?
As long as the price of oil and cost of seaborne freight remain subdued, Vale should still make money on iron even at $38. The BRL to USD exchange rate has actually improved in the last couple of months from over 4:1 to 3.71:1. There should be no non-cash foreign currency losses. However, Vale lost last quarter a large amount on various derivatives, mostly related to fuel. The base metal business of Vale will be at best at breakeven. The dam disaster might cost Vale close to $1B.
VALE will probably drift down toward $3.5 as the price of iron drifts lower toward $40. RIO and BHP will do no better. Eventually, the shareholders of RIO, BHP, and VALE will demand production cuts.
Iron ore sank to the lowest level in at least six years amid speculation that mills in China are cutting back steel output, hurting demand for the raw material while supplies from the biggest miners expand.
Ore with 62 percent content delivered to Qingdao fell 1.9 percent to $43.89 a dry metric ton, the lowest in daily data dating back to May 2009, according to Metal Bulletin Ltd. The commodity is headed for a third annual retreat, and Tuesday’s fall eclipsed the previous low of $44.59 set in July.
For “low-cost producers, it makes sense for them to continue to increase production,” Ivan Szpakowski, a commodities strategist at Citigroup Inc., said in a Bloomberg TV interview on Tuesday, referring to the largest miners. “They’re still profitable.”
Iron ore has been battered this year by rising output from the world’s biggest miners including BHP Billiton Ltd., Rio Tinto Group and Vale SA and faltering demand for steel in China, where mills account for half of global output. Goldman Sachs Group Inc. said last week that the global iron ore market is oversupplied, with steel consumption in China remaining weak. Policy makers in Asia’s largest economy have been attempting to steer the economy towards consumer-led growth and services.
“The market has underestimated the demand destruction from the economic rebalancing in China,” Zhang Yifan, head of foreign exchange and commodities at Guotai Junan Securities Co., said on Tuesday before the price data were released. “The worst is still ahead for the ferrous industry.”
The steel industry in China is reaching a critical point, according to Andy Xie, an independent economist who’s been bearish on iron ore prices for years and sees a drop below $40 before year-end. Mills will have to cut production, said Xie, a former Asia-Pacific chief economist at Morgan Stanley.
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FBEC looks like it is ready to break higher. The chart has been consolidating and recent press could propel the stock to new highs as investors take notice.
The stock will probably go down a little more. The only positive news that I've seen on this dog is that Cramer hates it now. That should be good for a 50%+ gain in the new year given his recommendations.
Losing money? Exchange had a negative affect but that will be partially reversed in 4th quarter if the currency continues to improve at 3.71 today vs. 4.? at end of last quarter. Of course, 3.71 is enough improvement for now and lets hope it doesn't do better. In the 30's income will look bad but they will still be generating cash.
The stock is $3 and change and the company is losing money. $40 or $30 at this stage doesn't matter. I will say this, Mackenzie at BHP has already said the price will go into the 30's at some point.
Bang on. I don't remember the price being $30 in the last month. Nor do I remember it being $40 in the third quarter. What year is this?
They have been bang on so far, plus at this juncture what is going to all of a sudden make the dynamics change? There is no give by anyone to cut production.