Embattled junior miner Atlas Iron has seen a bounce in its share price as confidence in the iron ore market continues to grow.
Atlas, which is fighting to stay solvent, and has sat at or below 1c a share on the ASX for nearly four months, closed at 1.4 cents on November 1, and has seen increased activity from traders over the last week.
Action on the stock – which was once worth more than $4 – was so surprising and extreme it led to a letter sent to Atlas from the ASX Compliance office, asking how the stock had risen from a 1 cent close on October 26 to a 1.3 cent close on October 27, through more than 150 million shares being traded.
Responding to the letter on October 27, the junior said it had no unreported company information that would explain the volume, but said: “Atlas is aware that the Platts Index 62% Fe iron ore price has risen from US$59 per tonne on Friday, 21 October 2016 to US$63.80 per tonne today.
“This has the potential to improve Atlas’ margins on the iron ore product it exports from Port Hedland in Western Australia.”
The iron ore price has risen in recent weeks as demand has picked up from China, a trend Fortescue Metals Group chief executive Nev Power says will continue.
Power reportedly questioned bearish analysis that has suggested renewed Chinese demand will not continue, calling it “perplexing,” according to the AFR last week.
The FMG boss is said to expect iron ore to remain between US$40 and US$60, and to even track higher than that if conditions continue to ripen.
“If you look at the supply curve without any change to demand and supply, the price should be higher than where it is today,” he was quoted as saying. “It is being held down by that negative sentiment.”
More pessimistic analysts are suggesting new volumes from Brazilian giant Vale, and still-growing Australian player Roy Hill, would again flood the market with supply, pushing the price back down again in the near future.
But Power is confident the price won’t go below US$40.
“[Chinese demand] would have to fall a long way to get to US$40 a tonne,” he reportedly said. “We don’t think it is going to happen.”