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The mining industry hasn’t had much good news in recent years, so further signs of an economic slowdown in China rattled already-skittish producers. With financial-sector reform choking off growth in China’s property sector, which uses vast amounts of raw material, a bloodbath for metal and mineral prices ensued. Companies’ stocks sank to decade lows, and cost cutting became the critical part of every miner’s strategy. Here are 2014’s pivotal moments.
Iron ore glut
Iron ore lost 50 per cent of its value in 2014, falling below $67 (U.S.) a tonne because of weak demand from China and a glut of supply. The world’s biggest producers – Rio Tinto Group, BHP Billiton Ltd., Vale SA and Fortescue Metals Group – responded not by cutting production, but by continuing to increase it, despite the low prices for the steel-making ingredient.
Their strategy has taken a toll on smaller, higher cost producers, such as Cliffs Natural Resources Inc. and Labrador Iron Mines Holdings Ltd. Both have suspended operations at iron ore mines in the Labrador Trough, a 1,600-kilometre-long area that straddles Labrador and Quebec. Two iron ore mines there, Bloom Lake and Wabush, have been shuttered, putting hundreds out of work.
Metallurgical coal glut
A similar story played out with metallurgical coal, which is also used to make steel. Too much supply and tepid demand from China left markets awash in so-called coking coal. Prices for the mineral have dropped 60 per cent over a three year period to $110 a tonne. The weak price has prompted companies to suspend projects and mothball mines in Western Canada.
The mega merger that never happened
You don’t normally see companies publicly disparage each other, but that’s what happened when Barrick Gold Corp. and Newmont Mining Corp. canned their merger talks in April. Barrick said Newmont reneged on their agreement, while Newmont said it could not work with Barrick chairman John Thornton. The deal between the world’s two largest gold producers would have consolidated their overlapping operations in Nevada and cut as much as $1-billion in annual costs. According to both Barrick and Newmont, merger talks are completely dead.
Gold and the Fed
In the first quarter of the year, gold rose 15 per cent to $1,387 an ounce. That was the high point of 2014 – and nowhere close to the $1,900 peak that gold touched in 2011. Bullion then proceeded to fall as low as $1,140 an ounce, after the U.S. Federal Reserve halted quantitative easing and Japan’s Abenomics stimulus sent the U.S. dollar soaring.
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