Chinese demand to drive African iron-ore projects – by Natalie Greve ( – July 4, 2013)

An increasing dependency on iron-ore imports by China would present substantial opportunity for the intensified development of African iron-ore projects, the MSA Group geology operations manager Brendan Clarke said at the Geological Society of South Africa’s GeoForum conference on Thursday.

China’s iron-ore import ratio was set to rise from 70% of total consumption to 85%, as local grades declined and the costs associated with the mining and beneficiation of lower-grade ores increased.

While the Chinese government was a significant producer, Clarke believed that domestic producers offered an expensive, yet low-quality product. As a result, the country was the world’s largest importer of iron-ore, bringing in 58% of total production in 2012.

The bulk of these imports were from the Pilbara region of Australia, accounting for 45% of imports. South Africa accounted for 6% of the iron-ore China sourced from outside the country in 2012. “Aside from projects in South Africa, there is very little production elsewhere on the continent, as the mega-projects, such as Tonkolili, in Sierra Leone, Simandou, in Guinea, and Mbalam, in Cameroon, struggle to get over the line,” Clarke commented.

He cautioned, however, that the existing Chinese ‘credit crunch’ and economic slowdown would have a detrimental knock-on effect on iron-ore prices. In addition, new projects faced a plethora of challenges, most notably rising production costs.

“Much like most other mining sectors, the iron-ore industry faces increasing regulatory burdens, the threat of resource nationalism, including ‘supertaxes’, a scarcity of skilled labour, and degrading ore reserve quality,” Clarke said.

With long-term forecasts outlining a fall in iron prices to below $100/t, Clarke believed that, at these prices, many producers would be unable to realise the required margin, and would thus need to transition towards becoming a low-cost producer.

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