Champion Iron Ltd [ASX:CIA] dropped as much as 10.4%, to a low a 90 cents, this morning. But the stock’s drop hasn’t affected investors who got in at the start of 2017 significantly. Year-to-date, CIA is still up 80%.
What happened to Champion’s share price?
The price of iron ore slid again last night. According to the Australian Financial Review:
‘The spot price of iron ore now has fallen one-third from its February peak, as the slide into a bear market turns into an accelerating rout.’
This is what’s causing CIA’s share price to fall. As an iron ore miner, CIA’s profits are tied to the price of iron ore. If the spot price trends down, the anticipation is that profit will be hurt in the immediate future. AFR again:
‘Sellers are keen to sell and buyers, anticipating further price drops, are reluctant to buy, contributing in part to the volatility. Steel mills in China are still in the midst of tapping their substantial iron ore stockpiles, which means they are unlikely to rush to buy any seaborne cargoes, market sources told Metal Bulletin.’
Of course, the opposite can happen. If the iron ore price spikes, then it’s likely CIA’s share price will too.
What now for the iron ore price?
If you believe the iron ore price will appreciate in the long term, finding the best iron ore miner you can and sticking with it might be the best course of action.
What I’m saying might sound simple. But, too many times, investors get scared by a sudden drop in share price and choose to sell out for a loss.
If you’re going to invest in the resource sector for the long-term, then you shouldn’t let daily, monthly or even yearly slumps discourage you. If you’ve done your homework and you bought into a stock for less than its worth, hold on.
There is nothing more depressing than selling out for a loss to see that your prediction, in the end, turned out to be right.
Junior Analyst, Money Morning
PS: Resources are back in business after their revival in 2016. The six month-long flurry of investment in the resource sector has sparked a string of fast, three-digit gains on some mining stocks.
Saracen Mineral Holdings is up 163.1%; Whitehaven Coal has soared 152.9%; Mineral Resources is 138.2% higher; Fortescue Metals Group gained 116.6%; and St Barbara Ltd is up 114%.
According to resources analyst Jason Stevenson, this is only the start.
In a new Money Morning report, ‘The Top 10 Australian Mining Stocks for 2017’, Jason introduces you to 10 cheap, top-quality Aussie mining stocks that look set to soar as this year’s commodities comeback pushes ahead.
To get your free copy of Jason’s report, click here.