Iron ore stocks prove to be ASX’s Achilles heel, but some small caps prove resilient

The ASX dipped by as much as 1% in morning trading, although it had begun to recoup some of its losses at time of writing recovering half of its intraday losses.   The S&P/ASX 200 index was down 0.5% at 7,462 near midday after bouncing from a more than two-week low of 7,529.20 to an intraday high of 7,466.7. Of the companies that reported this morning, Newcrest Mining Ltd recorded a profit, Evolution Mining Ltd (ASX:EVN) slashed its dividend and Origin Energy Ltd (ASX:ORG) and South32 Ltd reported losses. The Reject Shop Ltd boomed. The big banks fell about 0.5% overall, including NAB’s dive of 1%. ANZ got lucky today, following Jefferies' downgrade which had little effect. Woodside Petroleum Limited (ASX:WPL) fell 2.4% as WTI crude fell 1.3% after losing 1.7% overnight. There could be some good news on the horizon, with Australia’s July labour force data much stronger than expected and the unemployment rate dropping to a 12.5-year low of 4.6% against the 5% that was expected. Employment rose entirely in part-time jobs. This could all change, however, if the country fails to bring the current COVID-19 outbreak under control. Iron ore continues to drop It wasn’t only the banks dragging the ASX down. Iron ore miners did a lot of their own damage after spot iron ore fell 5.6% on Wednesday to a 4-month low of $US149.75. Concerns related to concerns China’s steel output restrictions in H2 2021 continue to grow.  "Prices have now declined 31% from July 15 to August 18, signalling just how quickly fortunes have turned for the steel‑making ingredient,” said CBA's Vivek Dhar. "Mysteel’s iron ore price benchmark fell below $US150/t (62% Fe, CFR China) yesterday. Steel mills in China are tolerating lower grade ores with higher impurities as their objective is now cost minimisation over maximising productivity." It has also been reported that China is determined to reduce pollution ahead of the winter Olympics in February next year. This means restrictions on steel production will stay in place until after the Games. BHP Group Ltd, which earned circa 70% of its profits from iron ore over the last year, is now on a five-day losing streak having shed 14.7% so far. Other iron ore majors to suffer are RIO, down 4%, FMG down 4.6%. Singapore iron ore futures fell an additional 5.4% to a 4-month low near $US142 a tonne. Iron ore is now down more than 30% from its May peak. It is not a good time to be in iron ore. On the small cap front Venture Minerals Ltd (ASX:VMS, OTC:VTMLF) is defying the iron ore odds and having a great day, up 19.28% at time of writing. Venture has booked its first shipment of iron ore following the completion of plant commissioning and steady-state production achievement at its Riley Iron Ore Mine in Tasmania. Alto Metals Ltd (ASX:AME) is another in the green this morning up 3.49%, after it delivered assays of up to 8 metres at 13.6 g/t gold from 56 metres at the Lord Henry pit within the Sandstone Gold Project.  Caspin Resources Ltd (ASX:CPN) was up 7.86% after releasing gravity gradiometer survey results, which the company says, “supports our belief that the intrusion is largely unexplored and that exploration to date has been focused only on easily accessible surface exposure”.  PolarX Ltd (ASX:PXX) is up 6.25% after it identified three gold anomalies greater than 50ppb gold in soils that measure more than 1.3 kilometres long within its Humboldt Range Gold-Silver Project in Nevada, USA.  The S&P/ASX Small Ordinaries is up 0.49% to 3,495.60