Daily Brief Australia: Iron Ore, Iluka Resources and more

• SGX IO Futures January 2025 contract fell $1.85/ton, closing at $102.55/ton on 6/Dec, with prices trading in a $3.45/ton range.
• Prices traded above the weekly pivot point of $103.20/ton until 6/Dec but failed to breach the R1 resistance at $106.05/ton, reflecting constrained upward momentum.
• Volume Put/Call ratio rose to 1.47; March 2025 expiry saw the highest put volume. Implied volatility increased modestly for December expiry but declined for January and February.

• The funding package between Iluka Resources and the government was finalized, leading to a 10% market decline
• Iluka Resources planned to build a Rare Earths refinery in Enneba with the assistance of a $1.05 billion non recourse loan from the Australian government
• Iluka also had plans to process their Wimmera deposit through the refinery, despite challenges with separation and impurities causing delays in development.

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• We summarize the sensitivity of high-yield stocks Vale (VALE US) and Fortescue Metals (FMG AU) to the iron ore price. We try to answer what’s priced in at 100 USD/ton.
• We provide sensitivity tables for both stocks based on a range of 90-130 USD/ton. At 100 USD/ton, Vale (VALE US)/Fortescue Metals (FMG AU)  trade at 7.4/6.4% dividend yields.
• Bullish iron ore participants subscribing to the 130 USD/ton forecast can see yields of 16.3%/11.4%. This forecast will be achievable if the China stimulus provides the expected impetus.