Jun. 19 - According to Credit Suisse, despite falling demand for iron ore driven by slowing Chinese steel growth, with prices expected to fall over the coming years, London Mining is well placed to weather the storm.
The City giant named the firm at the top of its iron ore producers list, alongside the likes of heavyweights BHP Billiton and Rio Tinto.
Analysts at the broker, who put London in this bracket said that “We believe there are still opportunities in the iron ore space, but, as we have written previously, given industry dynamics of increasing supply, slowing Chinese steel growth (reducing pricing power) and high capex costs, we are selective and target stocks that offer a strong combination of defensive margins, volume growth and attractive valuation.”
In the note on iron ore producers released this morning, Credit Suisse highlighted London’s significant near-term, low capex growth potential and the company’s high quality product as a reason for optimism going forward.
Only Rio and BHP are ahead of London in the broker’s list of most profitable iron ore producers.
It heads the list of iron ore volume growth but adds that longer-term growth will be limited unless it can secure further investment.
London is targeting an initial 5 million tonne per annum capacity at the flagship Marampa mine in Sierra Leone by mid 2013, after which Credit Suisse sees significant value uplift if all goes to plan, with an expansion to 9 million tonne per annum from 2015.
It reckons the company can significantly reduce freight costs through the introduction of capsize vessels later this year.