Rio Tinto, Fortescue hit pay dirt as prices surge – by Sarah Turner and Jenny Wiggins (Australian Financial Review – January 18, 2021)

Another stunning rally in iron ore prices is set to put a rocket under profits for the major iron ore producers, showering shareholders with dividends, shoring up the sharemarket and helping the government restore its pandemic-ravaged finances.

Last week, the spot iron ore price reached $US172.36 a tonne, up 1.3 per cent on the previous session according to Fastmarkets MB. Iron ore futures on the Singapore exchange traded at $US170.15 a tonne at the end of the week – the highest since their inception in 2013 – after rallying nearly 10 per cent since the start of the year.

William Curtayne, portfolio manager at Milford Asset Management, said that if iron ore prices were held at about $US165 a tonne there would be large-scale upgrades to the earnings expectations of the iron ore miners.

For example, Rio Tinto’s 2022 earnings would be upgraded by just over 100 per cent, while Fortescue would also see an upgrade of more than 100 per cent to 2022 earnings.

Essentially “profit will be twice as much as people were expecting”, he said. The market currently expects $9.5 billion in after-tax profit in 2021 from pure-play iron ore miner Fortescue.

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