I have selected Arrium (ARI) for review, from a technical perspective. The author who is not a professional adviser, acknowledges a personal share-holding. It is intended for personal evaluation, and is not a recommendation for others to buy or sell these shares.
Historical & Company profile
Previously known as One Steel, it was born thirteen years ago when BHP was divesting its Australian steel-making businesses to concentrate on its global mining activities. It followed the spin-off of Bluescope Steel.
The name was changed to Arrium on July 2, 2012 to reflect the growing importance of its subdivision Arrium Mining, established in 2007, to produce and export haematite iron ore from the South Australian mining operations at the Middleback Ranges near Whyalla and Southern Iron in the north of the state, together with a dolomite mine near Ardrossan. In the last twelve months, iron ore sales increased to 8.28Mt from 6.29Mt providing strong earnings of $340 million (EBITDA).
The other two divisions of Arrium are:
- Arrium Mining Consumables with EBITDA OF $197 million, and
- Arrium Steel withd EBITDA OF $76 million in the 12/13 FY report
Despite the improved earnings Arrium recorded a Net Loss for the period attributable to ordinary equity holders of $694.7 million.
However Arrium stands to profit from improvement in the prospects for the Construction and Infrastructure sectors of Australian business activities.
The Long-Term Share-Price Record
The share-price has roughly mirrored the fortunes of the general Australian share-market (eg ASX 200) except for the absence of any rebound in the share-price since a down-turn in 2011. For the last two years the shares have traded in a range between 50 cents and $1.40.
It should be noted that if there is a break-out of the share-price above resistance at $1.40, the next resistance level is at $2.50.
The 38.2% Fibonacci level is at $3, and the 50% retracement, also a resistance level, is at $4.
These are targets that could be attained in the next year or two if economic and trading conditions continue to improve.
The Short to Medium Term Outlook for Arrium
Just in the last three months the Arrium share-price has emerged from a plateau of around 80 cents to now test resistance at $1.40. There is now an uninterrupted uptrend.
This Daily chart has Fibonacci Extension Levels marked to suggest targets which are attainable in the near future if this impulsive move continues.
The initial target range is $1.60 to $1.80. A medium-term goal is at $2.05.
- Arrium shares soar on upbeat outlook (news.com.au)
- Arrium posts $695m net FY loss (bigpondnews.com)
- South Australia emerges as global force in mining (informaaustralia.wordpress.com)
- Why lower iron ore prices could mean higher Capesize rates (shippingtribune.com)
- Overnight press – more iron ore for China? (forexlive.com)
- BlueScope shares fall on outlook concerns (news.com.au)
Categories: Business, Chart Analyses, Investment, Technical Analysis
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