Iron ore slump hurting Kumba

Iron ore prices have been the major news this week as prices slumped to multi year lows on increased supplies making their way to market from the larger producers. Their attempts are aimed at the higher cost producers who would not be able to sustain themselves for a lengthy period of time with subdued price pressure.

Chinese steel mills ramped up production in the wake of weaker economic growth with the government hoping to plug unnecessary spending in the trade balance due to a lack of supply in China itself. These steel makers sit at the high end of the cost curve however they are able to access funds from the government willing to bail them out of financial woes thus putting even further pressure on export producers.

What they didn't expect was the dramatic fall in economic activity that has blown the situation out of all proportion.

Is iron ore going to get even worse next year? https://t.co/ZJhyKAcqSB pic.twitter.com/8FR0GGFAFB

— Thomas Biesheuvel (@tbiesheuvel) October 28, 2015

One stock that has received a drubbing as a result has been Kumba Iron Ore, based in South Africa producing most of its ore from Sishen in the Northern Cape.  Traders released their creative ability when weighing up what the last two years has been like if you had invested in the stock back at it's highs of R620!!!

That's right folks, from that high made in early 2013 till this week's lows represents a staggering 91% loss in share value. I must admit seeing the price around the R150 level did look attractive at one stage but didn't appeal to me with such weakness and seeing the price over 60% off from those levels does make me feel happier that I didn't take a long term hold at that time however I do think that at these levels you have to see some sort of value coming through.  

#Finding Kumba @tradinglikeafox @vasilisgirasis pic.twitter.com/vayM7L1nn8

— Jovann (@jovannbence) October 29, 2015

This tweet perfectly sizes up the situation many mining stocks face at the moment, Lonmin, third largest producer of platinum in the world now sitting at stock price below R5! Kumba the same example , I really can't envision seeing any further drops, commodities obtain there worth through intrinsic value , it impossible for them to go to zero.

Found this in my pocket this morning. Guess Im buying $JSEKIO and $JSELON shares today! #JSE #Equities #Trading pic.twitter.com/NzF8q0K0fw

— Theo Reinecke (@ReineckeTheo) October 30, 2015