Markets: BC's iron upswing

As the miner ramps up iron ore production, a spot price above $US110 over the next year would bring record profits and a further boost to its stock.

BC Iron’s shares have been on one of their periodic tears. The stock is up 6 per cent since August 21 after falling 10 per cent between August 13 and August 21 and gaining 45 per cent between June 3 and August 13.

That’s enough to take the breath away from any investor. Still, there may be more upward momentum for BC Iron. The Perth-based company says its operating costs for the life of its Nullagine iron ore project, which Fortescue has a 25 per cent stake in, will be between $46 and $50 a tonne. That’s more than enough of a margin for BC Iron, with iron ore prices staying stubbornly above $US130 a tonne every day this month, bar one.

Evidence is growing that the Chinese economy is stabilising after fears of a dramatic slowdown. The Tianjin spot price is one of the benchmark prices for the global iron ore industry, at $US138.70 a dry metric tonne with 62 per cent iron content. Nullagine produces a wet product with 57 per cent iron content.

If the iron ore price stays between $US110 and $US120 a tonne in the next 12 months, as many commodity analysts predict, that seems a good enough margin for BC Iron. The company could then see record profits, as it is increasing production to as much as 6.2 million tonnes in 2014.

Watch out for further gains in the share price as some continue to bet on iron ore.

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