The Financial Post takes a weekly look at investing products worthy of a spot in your kit. This week: Iron ore

Anybody who still has any lingering doubts that Canada is the next big player in iron ore should have taken a walk down down the aisles of the 2011 Prospectors & Developers Association of Canada mining convention in Toronto this week.

Frank Condon, director of Quebec operations with Adriana Resources Inc., said there were easily three times as many people stopping by the iron exploration company’s booth this year compared with last.

“It’s the most interest we’ve ever seen,” he said. “When the mom and pop investors stop by and they see 4 billion tonnes indicated, there’s a lot of people saying ‘Gee whiz, that’s a lot.’ It certainly is an eyecatcher.”

Investors may also want to bulk out their portfolio with a little iron ore, one of the primary components of steel.

Mr. Condon, who has more than 40 years experience working in the resource industry, was referring to Adriana’s Lac Otelnuk project in the Labrador Trough in northern Quebec. The company secured a $120-million deal with China’s Wuhan Iron and Steel Co. Ltd. in January to co-develop the massive deposit, which would have been much too expensive for the junior miner to do on its own.

And on Monday, New Millenium Capital Corp. worked out a financing deal with India’s Tata Steel to develop its own project in the region.

Iron ore has hit historically high prices of US$200 a tonne on intense construction demand from China, India and other developing countries.

All the attention the world is now paying to Canada’s previously dormant iron sector has created an excellent buying opportunity for speculative investors, John Stephenson, portfolio manager with First Asset Funds, said in an interview.

“The huge development wave in China is going to continue for at least the next three or four years. Both price and demand will remain high,” he said. “I’d say we’re on the cusp of another buying wave. It’s a sector that China wants to consolidate, it’s a hot sector that’s going to get hotter and you’ll see more IPO and M&A action.”

However, none of these upstarts are close to production and remain risky buys on the TSX Venture Exchange.

Arnold Zwaig, senior wealth manager with ScotiaMcLeod, said investors are better off sticking with the big three producers — BHP Billiton PLC, Vale SA and Rio Tinto.

“How much of the M&A premium is already priced into those upstarts?” he said. “It will take so many years for these projects to give China what it needs, it will still need to go to the big producers.”

While there’s no specific ETF focused on iron as the mineral is sold on contract and by the tonne, there are natural resources ETFs that hold either the big three or even coal producers such as Teck Resources Ltd. (coking coal is a key part of the steel smelting process).

One option is the Market Vectors Steel ETF from Van Eck Global, which counts Vale and Rio Tinto as its top two holdings along with major U.S. iron producer Cliffs Natural Resources Inc. in its top 10. The ETF, started in 2006 on the New York Stock Exchange, holds assets under management of about US$242-million and an expense ratio of 0.56%.

Another is the Invesco PowerShares Global Steel Portfolio ETF, which is traded on the Nasdaq and carries a market value of US$11.7-million. The MER is 0.75% and top holdings include Vale and steel producer ArcelorMittal as well as several international iron producers.