The Strike Resources Limited (ASX: SRK) share price is flying today after the company made a major iron ore announcement. Here’s the lowdown.
The post Why the Strike Resources (ASX:SRK) share price is leaping 12% appeared first on The Motley Fool Australia. –
Strike Resources Limited (ASX: SRK) shares are flying today after the mineral resources company made a major iron ore announcement. At the time of writing, the Strike Resources share price is trading 11.9% higher at 23.5 cents. In comparison, the All Ordinaries Index (ASX: XAO) is currently down 0.22%.
At one point during earlier trade, Strike shares rallied by as much as 21% before retreating to their current level.
Let’s take a closer look at what’s driving the company’s shares today.
Strike strikes it rich
In a statement to the ASX, Strike declared it had shipped 20,000 tonnes of iron ore from its Apurimac Project in Peru since December 2020. In that time, 6,000 tonnes of ore have already been crushed and processed. The ore consists of 64% to 65% iron.
Strike expects the site, which it fully owns, to increase production to 125,000 tonnes per year.
The company claims operational costs of extracting and crushing the ore will equate to roughly US$70 per tonne. In comparison, the current market price of iron ore is US$168 per tonne. Strike claims iron ore’s price can still climb by an additional US$33 per tonne. The website Trading Economics, however, is forecasting the iron ore price to fall to $143.81 in 12 months’ time.
Words from the managing director
Strike managing director William Johnson said the following in relation to the announcement:
Whist the Company remains firmly focussed on developing Paulsens East in the Pilbara into production, current market conditions have provided an opportunity to generate additional valuable cash flow from a mining operation at our Apurimac Project in Peru as well.
Our local Peruvian team on site have done a tremendous job in marshalling local communities, miners and contractors together. Strike looks forward to replicating this operation several times across different deposits and community groups so we can progressively ramp up production whilst providing sustainable economic employment opportunities for local community members.
Iron ore’s meteoric rise
Iron ore’s commodity price is up 86.7% on this time last year. What is the main reason for this? In a word, China.
Demand for the product from The People’s Republic is booming as the country invests in its infrastructure and steel making capabilities. China alone produces over half of the world’s steel.
As China is the largest customer for iron ore, and it wants more of it, global demand for the mineral is up. As demand for a product increases, then so too must its price. In economics, this is known as the law of supply and demand.
Strike Resources share price snapshot
One year ago, the Strike Resources share price was trading at 3.7 cents. Since then, the company’s value has shot up by nearly 590%. Strike shares reached their 52-week high of 30 cents in January this year.
Based on the current share price, the company has a market capitalisation of around $52 million.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of February 15th 2021
- Why Corporate Travel Management, Silver Lake, Volpara, & Vulcan are pushing higher
- Why the PlaySide (ASX:PLY) share price leapt 8% this morning
- ASX 200 down 0.15%: Westpac asset sale, Webjet update, gold miners jump
- Why the Bailador (ASX:BTI) share price is lifting this morning
- What’s going on with the Cimic (ASX:CIM) share price today?
Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.