A Wall Street Transcript Interview with Rob Clifford, Analyst with Deutsche Bank AG London for the Pan-European Metals and Mining Research Team: Big Miners Shift Focus Back to Profit Margins

Wall Street Transcript

67 WALL STREET, New York - May 5, 2014 - The Wall Street Transcript has just published its Metals & Mining Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Mining Safety and Environmental Concerns - Global Iron Ore Production - Emerging Market Infrastructure Construction - Chinese Demand for Industrial Metals - Zinc Supply Deficit - Demand Growth in Zinc - Accelerated Grid Spending in China - Copper Demand in China

Companies include: BHP Billiton Ltd. (BHP) and many others.

In the following excerpt from the Metals & Mining Report, an expert analyst discusses the outlook for the sector for investors:

TWST: You believe that investor concerns about iron ore prices falling are overblown. Can you elaborate and tell us how you think prices will actually trend?

Mr. Clifford: The concern in the market around iron ore is simply that China's demand is slowing, and that supply that has been building for a number of years is going to hit the market over the next few years. The iron ore market will then be in surplus and the price will fall. I agree with all of that. It's just the magnitude of the fall we disagree with.

So a number of theses in the market are that the iron ore price falls to $70 to $80 a ton within the next six to 12 months. However, when you look at the delivered cost of the getting the ore to China and you factor in the achieved price - remember, the quoted price that we all see on the screen is the landed price in China for a 62% grade iron ore, which is the main benchmark. But no one produces that exact product, so differences based on grade, moisture contents, impurity levels, etc. will impact the product quality.

When you take all of that into account and look at the margins, even with the new tonnage coming over the next few years, if the price were to fall, say below $100 a ton, there wouldn't be enough iron ore to meet the demand, albeit slowing demand under our expectations. In fact, to get the iron ore price down to where the market appears to be pricing the stocks, you would need China to contract or Chinese iron ore demand to actually contract, which we don't believe is likely.

TWST: If I'm a metal and mining investor, which other metals should I be focused on and why? What are some of the macro factors creating opportunity around those metals?

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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