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If you want to understand the forces behind the global commodity slump, turn your thoughts to the rust-red flatlands of Western Australia, where a mining magnate’s grand ambition is on the verge of becoming reality.
It’s there that Gina Rinehart, chairman of Hancock Prospecting and the richest person in Australia, is putting the final touches on her Roy Hill project, a new iron ore mine that cost $11-billion (U.S.) to develop. It is expected to begin producing any day now and at full capacity will churn out 55 million tonnes of ore a year, using its own railway and a specially built port facility to get its output to buyers.
But here’s the catch: The new mine, the culmination of a 20-year-old dream for Ms. Rinehart, is entering a market already flooded with iron ore. Prices have plunged by two-thirds since their peak in 2012, and even more capacity is being added, notably through Vale SA’s S11D project, a massive new Brazilian mine that is expected to start production next year.
The head-on collision between supply boom and price bust in the iron ore industry is a microcosm of what has taken place throughout much of the mining sector in recent years. Since July, the price slump has taken on a new urgency, with several metals and minerals slipping from already depressed levels to mult-year lows.
In addition to iron ore, the prices for copper, gold, nickel, aluminum, zinc and lead are now at, or close to, their cheapest points since 2009.
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