The Cettire Ltd (ASX: CTT) share price has fallen hard since the start of the year. It’s down 28%. Does this mean that the business is now a compelling idea?

It has fallen even further if we look further back. Since the middle of November it has actually dropped by 45%.

The (ASX) share market can be volatile as a whole. Individual shares can move dramatically in the space of a few weeks or even just a few days.

But, regardless of what’s going on with the Cettire share price, it is continuing to report fast growth and also expanding its product offering.

HY22’s triple-digit growth

The luxury product retailer announced a FY22 first half set of numbers that saw the company’s top line grow rapidly.

It said that sales revenue jumped 181% to $113.7 million and the product margin soared 178% to $42.7 million and the delivered margin increased by 118% to $24.7 million. Statutory net profit after tax was a loss of $8.3 million, down from a loss of $2.3 million. The business is investing heavily for growth. Active customers rose 208% to 209,000.

The company also pointed out that its profit margins improved in the first half of FY22 compared to the second half of FY21, with the delivered margin rising from 20.5% to 21.7%.

Cettire’s operating cash flow grew by 43% to $12.3 million despite all of the spending on marketing and so on that it’s doing.

Revenue growth accelerated in January 2021, with gross revenue growth of 242%.

Further growth initiatives

Around 80% of Cettire’s web traffic accessing the site comes through mobile internet. So the coming launch of the company’s mobile apps provides scope to improve and optimise the transaction flow and support improved conversion rates over time.

The business is launching into the luxury beauty category, which will expand the company’s total addressable market and is a “key step in propelling Cettire towards its ambition of being the world’s leading online luxury destination.” The Cettire share price may continue to be influenced by the company’s ability to capture more of the global beauty market.

Chinese expansion

The latest move by the company is to enter the mainland luxury China market.

Why China? It’s expected to be the world’s largest market for personal luxury goods by 2025, representing around 25% of the A$600 billion global market. Cettire pointed out this is a $150 billion total addressable market. China is a key priority for the company’s expansion.

Management are expecting that Cettire will be available to Chinese consumers in the second half of the 2022 calendar year.

As part of the market entry, it has entered into a partnership with JD.com a leading Chinese e-commerce platform that has over 550 million active customers and is China’s largest online retail platform. This had an initial positive reaction from the Cettire share price.

Chinese customers will have access to Cettire’s extensive luxury selection and post-sales support. JD.com will help to drive traffic, brand awareness and accelerate Cettire’s growth.

Cettire is also developing a local talent pool in mainland China, commencing with the first of a number of senior technology hires late in 2021. It’s intended that the local Chinese team will help develop features specific to the mainland Chinese market, including Chinese language websites.

The post Is the beaten-up Cettire (ASX:CTT) share price a compelling idea? appeared first on The Motley Fool Australia.

More reading

• Selling out? Cettire (ASX:CTT) share price slumps amid founder selling rumours
• Why Cettire, GrainCorp, James Hardie, and Nitro shares are pushing higher
• Cettire (ASX:CTT) share price rips 15% higher as it taps into $150b opportunity
• Why Cettire, Novonix, Serko, and Zip shares are sinking today
• Why the Cettire (ASX:CTT) share price is crashing despite 192% revenue growth

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Cettire Limited. The Motley Fool Australia has recommended Cettire Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) looks set to end the week in the red. At the time of writing, the benchmark index is down 0.7% to 7,239.4 points.

Four ASX shares that are falling more than most today are listed below. Here’s why they are sinking:

AGL Energy Limited (ASX: AGL)

The AGL share price is down 6% to $6.83. This morning the team at Morgans responded to the energy company’s half year results by retaining its hold rating and cutting its price target to $7.24. Although AGL delivered a better than expected result, the broker continues to believe that it is a difficult investment proposition ahead of its demerger.

Magellan Financial Group Ltd (ASX: MFG)

The Magellan share price is down 4% to $18.33. Investors have been selling down the struggling fund manager’s shares following the release of an out of cycle funds under management (FUM) update. That update reveals that Magellan’s FUM has fallen 6.85% since the end of January to $87.1 billion. And with several ratings agencies putting its funds under review or downgrading them, there are fears that its FUM could continue to fall from here.

Xero Limited (ASX: XRO)

The Xero share price has fallen 4.5% to $110.49. This follows broad weakness in the tech sector on Friday following a very strong inflation reading in the United States. This has sparked fears that interest rates will rise even quicker than expected, which could weigh on the valuations of tech shares like Xero.

Zip Co Ltd (ASX: Z1P)

The Zip share price is down 6% to $2.88. The catalyst for this appears to be the release of a disappointing quarterly update from buy now pay later rival Affirm overnight. The Affirm share price crashed 21.5% during the session and then a further 7% in after-hours trade.

The post Why AGL, Magellan, Xero, and Zip shares are sinking appeared first on The Motley Fool Australia.

More reading

• Do Affirm’s warnings raise red flags for the Zip (ASX:Z1P) share price?
• Why are these ASX 200 tech shares tumbling more than 6% on Friday?
• What’s the outlook for AGL (ASX:AGL) shares according to these brokers?
• ASX 200 (ASX:XJO) midday update: IAG upgrades guidance, Magellan sinks again
• Magellan (ASX:MFG) share price slides 6% as FUM bloodbath continues

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Xero and ZIPCOLTD FPO. The Motley Fool Australia owns and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Carnaby Resources Ltd (ASX: CNB) share price has sunk by as much as 13% today, despite another positive discovery at its Queensland site.

At the time of writing, the Carnaby Resources share price is trading 8.06% down at $1.71. However, the materials sector (ASX: XMJ) is the best performer today, up 0.8%.

So, why are ASX investors unenthused by the copper and gold explorer’s latest announcement?

Let’s take a closer look…

Copper mineralisation at Nil Desperandum

Carnaby Resources has exploration sites in the Pilbara Mallina Basin and Yilgarn Margin in Western Australia, and in the Mt Isa Inlier in Queensland.

Today’s announcement comes from its Queensland site — more closely, the Nil Desperandum Prospect of the Greater Duchess Copper-Gold Project.

The miner has hit a 70-metre downhole of copper sulphide mineralisation from 195 metres at the NLRC069 drill hole zone. It held a “visual estimate” of between 1 to 18% chalcopyrite, which is yet to be officially confirmed.

Another mineralisation of the same nature was intercepted at the NLRC067 drill hole, with a 63-metre downhole zone from 169 metres. The interception also contained the same percentage of chalcopyrite and is awaiting results.

With the results pending, and with the spread of COVID-19 in Queensland creating delays to drilling, Carnaby is focusing on the Lady Fanny target on the same site.

Comment from management

Managing director Rob Watkins called the copper mineralisation found in these zones “excellent”.

(…) the copper grades are clearly increasing in depth in the southernmost hole drilled which intersected 41m @ 4.1% copper in NLDD044.

While we must wait to complete heritage surveys before we can target the IP anomalies over 400m strike southwest of NLDD044, we have no shortage of quality drill targets to pursue at the Lady Fanny Prospect, where six lines of IP are in progress targeting below shallow drill results of up to 27m @ 2.8% copper, 0.9% g/t gold in LFRC009.

We eagerly await results from drilling at Nil Desperandum and IP geophysics from Lady Fanny.

Carnaby Resources share price snapshot

It hasn’t all been downhill for Carnaby Resources.

Last Friday, the Carnaby Resources share price shot up 33% to $1.80 apiece. This came after the company announced it had intersected strong copper sulphide mineralisation at the same site. In the month before, it soared after pleasing assay results.

The miner has a market capitalisation of $246 million and a price-to-earnings ratio (P/E) of 573.

The post Carnaby Resources (ASX:CNB) share price drops 8%, with investors unimpressed by exploration success appeared first on The Motley Fool Australia.

More reading

• Why Carnaby Resources, News Corp, Piedmont Lithium, and PointsBet shares are pushing higher
• Boom! Carnaby Resources (ASX:CNB) share price rockets 33% on ‘major discovery’
• Here’s why the Carnaby (ASX:CNB) share price is rocketing 33% today

Motley Fool contributor Alice de Bruin has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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.

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The Bitcoin (CRYPTO:BTC) price is down about 1% since this time yesterday, currently trading for US$43,232 (AU$61,311).

That puts the world’s biggest crypto by market cap down 9% so far in the calendar year and down 37% from its 10 November all-time high.

More importantly, perhaps, the Bitcoin price remains down from US$47,000.

Why is US$47,000 an important level?

If you bought Bitcoin anytime over the past 5 months, odds are you’re nursing a loss today.

Why?

Because according to Blockforce Capital, US$47,000 is the average price crypto investors paid for the token over the past 5 months.

As Bloomberg reports, Brett Munster, portfolio manager at Blockforce Capital says that crypto investors who bought in since mid-September could be hesitant to buy any more until the Bitcoin price goes higher and they can at least recoup their initial investment.

The indicator, called a short-term cost basis, is an “impediment to creating some consistent momentum,” Munster says.

The Bitcoin price today is also hovering near the tokens 200-day moving average (MA).

While that’s a coincidence, Munster says the 200-day MA is “a widely recognized indicator for determining which direction markets are trending in”.

With the 200-day MA for the Bitcoin price aligning with the price the average investor will have paid for the token over the past 5 months, “this threshold could provide resistance as those recent buyers may look to recoup their investment and sell off,” Munster says.

Where to next for the Bitcoin price?

The Bitcoin price hit a recent low of US$33,725 on 24 January, according to data from CoinMarketCap.

The big question for crypto investors now, is where is the token likely to head next.

According to Munster (quoted by Bloomberg):

While it’s still too early to declare with any certainty that $33k was the bottom, there is reason to believe that there is now much more asymmetry to the upside than downside. That doesn’t mean Bitcoin couldn’t fall back down again, but the data seems to suggest that the upside potential now outweighs the downside.

The post Is this ‘impediment’ holding back the Bitcoin price? appeared first on The Motley Fool Australia.

More reading

• Could Bitcoin (CRYPTO:BTC) be eyeing off a $150,000 future?
• Bitcoin price rally fizzles. Here’s what the experts are watching for next
• The best cryptocurrency exchanges for Australians
• $3.6 billion crypto heist thwarted, sending this obscure cryptocurrency skyrocketing
• This global financial giant is buying up Bitcoin. Could ASX banks be next?

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Bitcoin. The Motley Fool Australia owns shares of and recommends Bitcoin. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Woodside Petroleum Limited (ASX: WPL) may be reporting its financial results next week, but its AGM in a couple of months is already in focus. The Woodside share price is trading at $26.51 today, a slight fall of 0.04%.

In comparison, the benchmark S&P/ASX 200 Index (ASX: XJO) is sliding 0.65% today.

Let’s take a look at what might impact the AGM.

Climate debate heating up

Woodside is set to face off against some of its investors at its annual general meeting. This meeting will likely be held in April.

Shareholder activist group Market Forces says it has worked with shareholders at both Woodside and Santos Ltd (ASX: STO) to call on the companies to reduce production in line with net-zero emissions by 2050.

The group says the action follows 19% of Woodside shareholders and 13% of Santos shareholders voting for the companies to scale back production at last year’s AGM.

Market forces asset management campaigner Will van de Pol said:

The need for these resolutions has only increased over the past year, with both companies pursuing mergers to drastically increase their oil and gas production capacity, and moving ahead with billions of dollars worth of new projects that are incompatible with the Paris Agreement’s climate goals and International Energy Agency’s Net Zero Emissions by 2050 scenario.

Woodside and Santos have not only rejected investors’ demands for alignment with global climate goals, they’ve actually moved in the complete opposite direction.

However, Woodside publicly states on its website it is aiming for net-zero by 2050. In its fourth-quarter report, released on 20 January, Woodside highlighted its plans to invest $5 billion in new energy products and lower-carbon services by 2030. CEO Meg O’Neill stated:

This significant investment will position Woodside as an early mover in the new energy market and support the decarbonisation goals of our customers.

Yet Market Forces remains skeptical of the operational emissions targets set by Woodside and Santos.

It says: “Both Woodside and Santos claim to support the Paris Agreement’s climate goals … Yet the vast majority of these companies’ emissions – those generated when their oil and gas is burned – is not covered by their targets, allowing them to continue undermining the Paris goals by increasing production.”

Woodside is due to report its full-year results next week on Thursday, 17 February.

Woodside share price snapshot

The Woodside share price is up 5% over the past year and more than 20% year to date. It has gained nearly 14% in the past month but has climbed 2% in the past week.

For perspective, the S&P/ASX 200 Index (ASX: XJO) has returned roughly 5% over the past year.

Woodside has a market capitalisation of about $25.6 billion based on the current share price.

The post Own Woodside (ASX:WPL) shares? Here’s why the oil giant will face off against investors at its AGM appeared first on The Motley Fool Australia.

More reading

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• 5 things to watch on the ASX 200 on Thursday
• Analysts rate these ASX dividend shares as buys
• 5 things to watch on the ASX 200 on Wednesday
• Own ASX energy shares? Citi issues stark oil production warning

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The S&P/ASX 200 Index (ASX: XJO) has decided to give investors a backwards step so far this Friday. At the time of writing, the ASX 200 Index has lost a disappointing 0.67% and is currently sitting at 7,240 points.

But rather than letting that get us down, let’s instead check out the ASX 200 shares that are topping the market’s volume charts, according to investing.com.

The 3 most traded ASX 200 shares by volume so far on Friday

Insurance Australia Group Ltd (ASX: IAG)

Insurance Australia Group (or IAG as it’s better known) is our first ASX 200 share of the day. This insurance giant has had a hefty 11.98 million of its shares swap hands so far this Friday. This appears to be in response to IAG’s half-year earnings report that the company delivered this morning.

As my Fool colleague James reported at the time, IAG gave investors a bit of a mixed bag. But even so, IAG shares are pushing higher in the aftermath. The company is currently up a pleasing 4.4% to $4.75 a share. This is probably why we are seeing some elevated trading volumes going on today.

Pilbara Minerals Ltd (ASX: PLS)

Pilbara Minerals is next up today. This ASX 200 lithium producer has seen a sizeable 12.74 million of its shares bought and sold on the markets as it currently stands.

Again, there’s not much to report on Pilbara today, apart from a nasty share price fall. Unlike South32, Pilbara is taking things even further than the market, and is currently down by 3.4% at $3.24 a share. It’s this move downwards that has likely sparked so many Pilbara shares trading on the share market this Friday.

South32 Ltd (ASX :S32)

ASX 200 resources company South32 is our final and most traded ASX 200 share so far today. This diversified miner has had an impressive 12.83 million of its shares trade on the share market thus far this Friday. Unlike IAG, there’s not much to report about South32 today in an official capacity.

However, this company has experienced a rather decisive share price move which could explain this volume. South32 shares are pushing around 1% higher so far this Friday, in defiance of the broader market. It’s likely that it’s this move that has resulted in so many South32 shares finding a new home today.

 

The post Here are the 3 most heavily traded ASX 200 shares this Friday appeared first on The Motley Fool Australia.

More reading

• Why IAG, Rio Tinto, Unibail, and Westpac shares are pushing higher
• Here’s why the IAG (ASX:IAG) share price is charging 4% higher today
• ASX 200 (ASX:XJO) midday update: IAG upgrades guidance, Magellan sinks again
• IAG (ASX:IAG) share price on watch amid earnings miss but guidance upgrade
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns and has recommended Insurance Australia Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Kingsgate Consolidated Limited (ASX: KCN) share price is looking to finish Friday’s session deep in the red.

This comes after the company provided an update regarding its ongoing discussions with the Thai government.

At the time of writing, the gold miner’s shares are down 11.11% to $1.48 apiece. In comparison, the All Ordinaries (ASX: XAO) is down 0.73% to 7,540.4 points.

Let’s take a look at what the company announced to the ASX today.

Kingsgate progresses on Chatree, delays TAFTA

According to its release, Kingsgate is progressing with the Thai government on restarting the Chatree Gold Mine.

Located around 280 kilometres north of Bangkok, Chatree was historically a large-scale, low-grade, open-pit gold mine. However, in May 2016, the Thai government announced that the mine would close following accusations that villagers were poisoned by toxic waste. This led to all operations ceasing by the end of 2016, and Chatree was placed on ‘care and maintenance’ thereafter.

Further to the release, Kingsgate has mutually agreed to hold the issuance of the Thailand-Australia Free Trade Agreement (TAFTA) award.

The news of yet another delay has left investors frustrated, giving cause to sell off Kingsgate shares.

The date has been pushed back until 31 December 2022, which provides an opportunity for Kingsgate to get its affairs in order. Originally, the TAFTA award by the arbitral tribunal was scheduled for 31 October 2021, and then again 31 January 2022.

Kingsgate is working to optimise the restart process for Chatree, which could possibly include the initial refurbishment of plant number two. This would allow access to the current low-grade stockpile of 6.6 million tonnes of ore for processing. It is estimated that there are 73,000 ounces of gold and 780,000 ounces of silver.

Management comment

Kingsgate executive chair, Ross Smyth-Kirk commented:

It’s pleasing that we can engage in a mutual dialogue with the Thai Government about restarting Chatree, and at the same time deal with the TAFTA framework in a sensible and constructive manner. There is no downside to Kingsgate for the TAFTA award to be held for a further period, and I want to make it abundantly clear that this in no way impacts the restart of the Chatree Gold Mine.

About the Kingsgate share price

Over the past 12 months, Kingsgate shares have accelerated by more than 60%, but year to date they are down 23%.

The company presides a market capitalisation of about $328.66 million with approximately 221.32 million shares on its books.

The post This just sent the Kingsgate (ASX:KCN) share price tumbling 11% appeared first on The Motley Fool Australia.

More reading

• Here are the 3 most heavily traded ASX 200 shares this Friday
• Brokers name 3 ASX shares to buy today
• This ASX 200 share is a top buy after recent falls: broker
• Could opening WA borders expose ASX 200 mining shares to production risks?
• Should you buy Fortescue (ASX:FMG) shares before the mining giant reports next week?

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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.

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It has been another busy week for Australia’s top brokers. This has led to the release of a large number of broker notes.

Three broker buy ratings that you might want to know more about are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

IDP Education Ltd (ASX: IEL)

According to a note out of Macquarie, its analysts have retained their outperform rating and lifted their price target on this language testing and student placement company’s shares to $35.00. This follows the release of a better than expected first half update. Looking ahead, Macquarie expects IDP to benefit from the reopening of borders and its growing footprint in the key India market. The IDP share price is trading at $28.78 this afternoon.

Megaport Ltd (ASX: MP1)

A note out of Citi reveals that its analysts have retained their buy rating and lifted their price target on this network as a service provider’s shares to $20.20. Citi was pleased with Megaport’s half year results. It also highlights that with Megaport’s investments now behind it, growth and margins look set to pick up. In addition, Citi sees potential upside to its medium-term forecasts from higher than expected take-up of MVE as the partner channel kicks in. The Megaport share price is fetching $13.80 today.

Mirvac Group (ASX: MGR)

Another note out of Citi reveals that its analysts have upgraded this property company’s shares to a buy rating with an improved price target of $3.13. Citi notes that Mirvac delivered a half year result in line with its expectations. And while it suspects the market may be disappointed that the company didn’t upgrade its guidance, it sees plenty of value in its shares to upgrade them to a buy rating. The Mirvac share price is trading at $2.50 on Friday afternoon.

The post Brokers name 3 ASX shares to buy today appeared first on The Motley Fool Australia.

More reading

• Top brokers say there are still ASX 200 growth shares with massive upside in 2022
• Why are these ASX 200 tech shares tumbling more than 6% on Friday?
• Here are 3 highly-rated ASX growth shares
• Here are the top 10 ASX shares today
• Why AMP, AVZ, Megaport, and NAB shares are pushing higher

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Idp Education Pty Ltd and MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The battered Downer EDI Limited (ASX: DOW) share price could find some reprieve after Morgan Stanley reiterated its buy call on the ASX 200 share.

The engineering group shed around 4% of its value over the past two days after it posted a disappointing half year result.

The group’s interim earnings and revenue slid backwards and missed Morgan Stanley’s expectations.

Is this underperforming ASX 200 share a buying opportunity?

But that wasn’t enough to put the broker off as it believes the Downer share price has the potential to outperform from here.

There are a few reasons behind Morgan Stanley’s faith in the S&P/ASX 200 Index (ASX: XJO) share. Firstly, a number of one-off factors, such as issues caused by COVID-19, appear to have contributed to the earnings miss. These shouldn’t be a drag going forward.

Some areas of growth despite COVID headwind

The broker was also reassured after Downer’s Transport division delivered earnings growth of 16% in 1HFY22 compared to the same period last year despite bad weather. If not for this, management was confident that growth would have been significantly higher.

The performance of Downer’s Hospitality division was another sore point for shareholders as it recorded a $12 million loss. But at least management indicated that the loss will be minor in the current half. The turnaround is due to Downer’s successful exit of the problematic MCG contract.

Potentially better second half for the ASX 200 share

Investors can also find comfort in the fact that Downer usually delivers a stronger second half set of numbers.

Morgan Stanley pointed out that the gap between the first and second half may be even bigger this year due to Omicron.

In any case, the share price of this ASX 200 share is trading on an undemanding valuation and the group has a strong balance sheet.

How much is the Downer share price worth?

“It is focused on government-backed sectors that have a solid outlook,” said Morgan Stanley.

“Earnings stability remains an important attribute and something the company needs to demonstrate to justify higher multiples.”

It’s easy to overlook these strong points following the poor first half outcome. There’s also no guarantee that the COVID headwinds will abate in the current half. The lack of management guidance won’t help with confidence either.

Nonetheless, Morgan Stanley kept its overweight recommendation on the shares. But it lowered its 12 month price target on the Downer share price by $0.20 to $6.70 a share.

The post This ASX 200 share is a top buy after recent falls: broker appeared first on The Motley Fool Australia.

More reading

• Revenue, EBITA slide in 1HFY22 as Downer (ASX:DOW) share price plunges 7%
• 2 ASX shares to buy for dirt cheap right now: expert

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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.

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After two years of strict border controls to stop the spread of COVID-19 in Western Australia, the virus has found its way to the Pilbara region. But what might this mean for ASX 200 mining shares?

Australia initially took a cautious approach when the virus first reared its head in March 2020, closing its international borders. This led to the state and territories also shutting down travel within the country.

Fast forward to today, most of Australia has re-opened for tourism and business, except WA.

While WA Premier Mark McGowan made executive decisions to safeguard the public, he has also sought to protect the iron ore industry. But now COVID-19 has emerged in the remote mining region of Pilbara.

Last month, ASX 200 mining giant BHP Group Ltd (ASX: BHP) was forced to take measures after five of its staff contracted the disease. The workers self-isolated in their accommodation along with close contacts, Their quarantine was meant to be for 14 days. However, earlier this week the WA government shortened the isolation period to seven days and they were released.

Major ASX 200 mining shares such as Rio Tinto are already facing a tight labour market in the state. An increase in cases across WA — it recorded 37 new cases yesterday, its biggest number so far — means those challenges are unlikely to ease anytime soon.

How important is the iron ore industry?

Iron ore mining is a lucrative industry for the state, and the government will be keen to protect it. Iron ore miners based in WA brought in $155 billion to the state over the 2020-21 financial year. These included mining giants BHP, Rio Tinto Limited (ASX: RIO), and Fortescue Metals Group Limited (ASX: FMG), along with the other smaller players.

WA views the iron ore industry as critical in regards to filling up its coffers. Last financial year, the state took home $9.8 billion in royalty payments, which reflected a 26% increase year-on-year.

Given the size of the revenue source, Premier McGowan has mandated all mineworkers be triple vaccinated. Additionally, mining companies have enforced a rapid antigen test for anyone arriving on site.

What could a COVID-19 breakout mean for ASX 200 mining shares?

Mining companies have been pushing for the WA border to reopen to allow more workers into the state border. However, any border re-opening without stringent rules could potentially jeopardise a company’s workforce, adding to the labour squeeze.

This could affect ASX 200 mining shares. Bell Potter Securities’ Giuliano Sala Tenna said (quoted by the ABC).

Labour costs will rise and they won’t be able to get jobs done. There will be lots of dislocations within the projects, so we’re concerned that we’re going to see some weak quarterlies, which could see some knee-jerk reactions to some of the share prices [for] those miners.

When COVID-19 spread through another major iron ore producer, Brazil, it brought the industry to its knees.

However, Pilbara Ports Authority CEO Roger Johnston is more optimistic. He said (quoted by the ABC):

“We are uniquely lucky in Western Australia. We’re not dealing with one miner with one big mine, and then you shut it down. We have multiples of miners, many of them are very large and most of them have a suite of mines. When you spread your risk like that you’ve not vested everything in one mine.

I wouldn’t believe that you’re going to see, if there was an impact, mines shut down for months and months at a time as you’ve seen in Brazil.

While the existing labour shortage is an issue for ASX 200 mining shares in WA, a widespread outbreak of COVID-19 could exacerbate the problem. This could have an impact on production levels which in turn would mean less revenue for the state.

Multiple shutdowns across the Pilbara regions are something Western Australia is doing everything it can to avoid.

The post Could opening WA borders expose ASX 200 mining shares to production risks? appeared first on The Motley Fool Australia.

More reading

• Should you buy Fortescue (ASX:FMG) shares before the mining giant reports next week?
• Why IAG, Rio Tinto, Unibail, and Westpac shares are pushing higher
• Are ASX hydrogen shares in a ‘hot air’ bubble?
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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.

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