Monday's 12.8% fall in the small resources share price index was a record daily decline

Monday's 12.8% fall in the small resources share price index was a record daily decline. The smallest falls among the stocks in the index were the iron ore miners Atlas Iron and Sundance Resources - possibly because they had already been repriced dramatically. The index has now fallen 58% since the beginning of 2014. What had appeared to be the cyclical low point for the sector in June 2013 has been superseded by nearly 30%. As foreshadowed in our most recent investment report, the past few days will require a rethink of our hypothesis that resources sector equity returns would resemble those in the late 1990s and early 2000s. The dramatic shift in the price of crude oil following the earlier slump in iron ore prices has highlighted once again the tendency for commodity prices to gravitate toward marginal production costs if there is no countervailing market force, potentially rendering all but the most resilient in the sector unprofitable. The latest PortfolioDirect report is available here: (VIEW LINK)