Aussie Iron Ore CRASH 2020

Discover why some of Australia’s most popular Mining stocks Could take a Massive Hit in 2020…and What to Buy Instead

Download your free report now to discover why we should expect Aussie iron ore producer earnings to plummet in 2020–21. Plus, three alternative resource investments to consider in 2020.
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Iron Ore

Dear Reader,

Iron ore producers have been generating very impressive earnings and dividends recently…

  • Rio Tinto announced a record interim and special dividend of $3.08 a share, resulting in a whopping $2.5 billion payout on earnings growth of 12%.
  • BHP finished a massive $7.3 billion share buy-back in December 2018, coupled with $1.42 a share dividend, after selling its US oil and gas assets…
  • FMG also announced record profits and a dividend payout ratio of 78%.

But can the recent run of earnings and dividends be sustained?

We don’t think so…and neither does the RBA.

The graph below, published in a recent report from the RBA, shows the forecasted drop in iron ore prices over the next two years.

Iron Ore Price Chart

Source: rba.gov.au

There are plenty of reasons to believe that the good times for iron ore (and steel) producers could come to a grinding halt in 2020–21. Chiefly:

  • A temporary disruption to the global iron ore supply from the largest producer of iron ore and iron ore pellets in the world. The cause: a tailings dam break in Brazil, taking around 90 million tonnes of iron ore out of the market.
  • The Chinese construction industry, driven by various stimulus programs rolled out by the Chinese government, have also fuelled price increases…yet industrial production growth is flatlining, reducing demand for steel.
  • The US–China trade war has caused ‘sluggish’ growth in the global economy during 2019, according to IMF chief economist Gita Gopinath. As a result, growth projections have been revised down to 3.5% and could be revised down even further.
  • Growth in Australian supply capacity will be limited due to a lack of major iron ore projects. Rio Tinto, BHP and FMG have announced some big projects to expand production, but they won’t be operational for at least 1–2 years. This lead time means countering a price drop with increased capacity isn’t really an option.

With these factors looming over the iron ore and steel industry, you may see a bear market emerge over the next two years.

This is bad news if you are relying on dividends or holding shares in the big iron ore producers like Rio Tinto, BHP and FMG.

So where do you go for potentially better returns?

We have some ideas. Simply download your free copy of ‘Iron Ore Bear Market 2020–21: Three Better Resource Investments’ and discover three resources with potentially better prospects for 2020–21 in this report:

To get your copy — right now — enter your email address in the box below and click ‘Send My FREE Report’. You’ll get a downloadable PDF file delivered to your inbox within the next five minutes.

Download your free report now to discover why we should expect Aussie iron ore producer earnings to plummet in 2020–21. Plus, three alternative resource investments to consider in 2020.
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Simply enter your email address in the box below and click ‘Send My FREE Report’.

We will collect and handle your personal information in accordance with our Privacy Policy. You can cancel your subscription at any time.

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Also get a FREE subscription to the daily financial email The Rum Rebellion.
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All advice is general advice and has not taken into account your personal circumstances. Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

Calculating Your Future Returns: The value of any investment and the income derived from it can go down as well as up. Never invest more than you can afford to lose and keep in mind the ultimate risk is that you can lose whatever you’ve invested. While useful for detecting patterns, the past is not a guide to future performance. Some figures contained in this report are forecasts and may not be a reliable indicator of future results. Any potential gains in this do not include taxes, brokerage commissions, or associated fees. Please seek independent financial advice regarding your particular situation. Investments in foreign companies involve risk and may not be suitable for all investors. Specifically, changes in the rates of exchange between currencies may cause a divergence between your nominal gain and your currency-converted gain, making it possible to lose money once your total return is adjusted for currency.

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