Iron Ore Boom Generates 700% Gross Profit Margins For Big Miners – by Tim Treadgold (Forbes Magazine – July 14, 2020)

The iron ore boom powering the profits of the world’s biggest mining companies is showing no sign of fading thanks to stronger-than-expected Chinese steel demand.

Despite multiple forecasts over the past 12-months that the iron ore price was overdue for a fall it has done exactly the opposite, rising this week to a new 2020 high of $107 a ton, up 30% over the past four months.

Given that the biggest miners produce iron ore at a cash cost of around $13/t that latest price implies a gross profit margin, before accounting and other charges, of close to 700%.

As well as stronger-than-expected Chinese demand for steel as it stimulates its economy out of the Covid-19 slowdown, iron ore has been aided by continued production problems in some exporting countries, particularly Brazil.

Windfall Profits

For three of Australia’s biggest mining companies, BHP, Rio Tinto and Fortescue Metals, the prolonged boom in iron ore has delivered windfall profits.

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