Iron ore juniors, we reckon, may be entering a new phase. They’ve been the darlings of the market this year, mainly thanks to increases in iron prices themselves. The next round of pricing won’t be for another year.
But foreign interests have never been more interested in these stocks. Take yesterday. Russian Metalloinvest bought a hefty 20% stake in iron minnow Strike Resources (ASX:SRK). At a 39% premium to the market price. Those Europeans are so passionate.
Why would a firm thousands of kilometres away…be willing so heave so much money at so small a company…for such a big premium? Diggers and Drillers Managing Editor Dan Denning explains:
“Russian billionaire Alisher Usmanov just plunked down $100 million for a stake in Strike Resources.
“Strike has major iron ore project…in Peru. This not the first time that Usmanov has had a go at an iron ore miner in WA. He tried to sell his 19.7% stake in Mt. Gibson iron ore (ASX:MGX) to China’s Shougang, but had the transaction blocked by the Takeover’s panel.
“Do you see what’s happening here? There is one interest shared by both Russian and Chinese investors: getting rid of U.S. dollars as quickly as possible. China has nearly $1 trillion in U.S. dollar currency reserves. Russia and Japan are big dollar holders too.
“It’s the iron ore industry (in particular) and Aussie resource shares have become a kind of currency being traded by Russian and Chinese interests. We’re the new US dollar.”
