Iron ore price plunge could spell trouble for junior miners

The price of iron ore is tumbling to levels which threatens to leave some junior miners unprofitable.

Benchmark iron ore for immediate delivery to the port of Tianjin in China was last trading at $US52 per tonne, a 3.9 per cent fall from its previous close.

Iron ore is trading at its lowest point in over two months, as the commodity’s tumultuous year continues.

On April 2, iron ore was trading at a record low of $US46.70 per tonne, forcing companies to mothball operations and cut thousands of jobs.

In the same month, from April 16, iron ore made a 33 per cent rally which saw it rise above $US60 per tonne again.

On June 12, it was valued at $US65.40 per tonne – highlighting the quick descent the commodity is capable of as overy supply fears, coupled with a stock market plunge in China threaten to keep the lid on any increase. 

Atlas Iron was a high-profile victim of the iron ore collapse earlier this year after it closed its Pilbara mines and cut 600 jobs.

Since then, Atlas contractors have stepped in to help the company stay afloat, ushering in new deals that were expected  to deliver Atlas a break-even price of US$50 per dry metric tonne (dmt) for 62 per cent Fe.

A $US52 per tonne spot price is dangerously close to squeezing Atlas’ margin.

Similarly BC Iron is forecast to have a break-even price of $US52 per tonne, while Arrium’s break-even price is estimated at $US51 per tonne.

The juniors’ share prices are also suffering a blow as the iron price loses more ground.

At the time of publication, Arrium was down 3.7 per cent, trading at 13 cents.

On Monday, BC Iron lost over 3 per cent to open at 28 cents on Tuesday, while Mt Gibson lost 2.5 per cent and is trading at 19 cents. 

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