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Australia/New Caledonia/Papua New Guinea Mining

China’s need for steel will sustain ore miners: Rio – by Andrew Burrell (The Australian – May 2, 2014)

http://www.theaustralian.com.au/business

RIO Tinto iron ore boss Andrew Harding says iron ore prices will remain strong for at least another 10 to 15 years, declaring he pays no attention to short-term fluctuations in the price of the key export commodity.

Speaking at the In the Zone conference at the University of Western Australia, a bullish Mr Harding said the most important indicator for iron ore was the rate of urbanisation in China, which buys 60 per cent of the world’s seaborne iron ore.

With the iron ore price slipping to $US105.40 ($113.53) yesterday — a 20-month low — and prompting a sharp fall in iron ore miners’ shares, some analysts have forecast a return to prices well below $US100 in coming months as increased supply hits the market and Chinese economic growth slows.

That would hit the profits of Rio and its Pilbara iron ore rivals BHP Billiton and Fortescue Metals Group. It would also eat into the coffers of the cash-strapped federal and West Australian governments.

The three big iron ore miners have pulled back on their future expansion plans, preferring to preserve cash and boost productivity rather than commit to multi-billion-dollar greenfields projects.

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World’s heaviest haul railways defining the Pilbara then and now – by Ben Collins (Australian Broadcasting Corporation – May 2, 2014)

http://www.abc.net.au/northwestwa/?ref=banner

Iron ore trains are one of the unsung heroes of the Pilbara’s mammoth industry. Leading the world in heavy haulage, these trains also track the history of the region.

It was an inauspicious dawn of the rail age in Australia’s north western Pilbara region. But what began with short tramways and a problematic narrow gauge line from Port Hedland to Marble Bar over one hundred years ago, eventually became the lifeblood of Australia’s economic engine room.

As in many North West towns established in the late 1800s, tramways were built to service the early ports at Cossack and Balla Balla in the Pilbara. A more substantial railway, though still just narrow gauge, was built from Port Hedland to Marble Bar to service goldmining and the pastoral industry. The 114 mile railway was completed in 1912, and proceeded to run at a loss for 39 years until the last train came to a halt in 1951.

But a new era of heavy haulage standard gauge railways burst into existence with a flood of iron ore mines in the 1960’s. The first earthworks for the rail bed began in 1965 as iron ore mining permits and sales contracts were put in place for the Goldsworthy iron ore deposit. Construction proceeded at a cracking pace with over 100 kilometres completed and the first train running by May 1966. The line was then extended by 67 kilometres to the Shay Gap iron ore mine in 1972.

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No surprise mining taxes [Australia] please: Rio head – by Kim Christian (Sydney Morning Herald – May 1, 2014)

http://www.smh.com.au/

Rio Tinto’s head of iron ore Andrew Harding has warned Australia should not squander its reputation as a stable place to do business.

As the iron ore-focused miner began legal action in the US against its Brazilian rival Vale, Mr Harding urged the Australian government not to introduce surprising tax changes which could deter foreign investment.

“It really does startle an organisation,” Mr Harding told a business lunch in Perth. “Australia’s not the only place you can mine iron ore. “There’s an awful lot of high grade iron ore sitting in Africa, and for a whole lot of instability reasons it hasn’t been mined to date.”

His comments come as Rio Tinto filed a lawsuit in the US District Court against Brazilian miner Vale and an Israeli company over the rights to develop the massive Simandou iron ore deposit in Guinea in west Africa.

Rio alleges billionaire Beny Steinmetz and his company BSG Resources bribed officials and conspired with Vale to steal mining rights to the multi-billion tonne Simandou deposit but it has not specified the amount of damages it is seeking. Mr Harding said a period of volatile industrial relations and iron ore supply disruptions in Australia several decades ago had opened the door for Brazil to build the biggest iron ore business in the world.

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Red dirt in Red Square: Mining World Russia – by Cole Latimer (Australian Mining – April 28, 2014)

http://www.miningaustralia.com.au/home

As the Mining World Russia exhibition wraps up, Australian companies are looking to head home and count their successes at the show, and in the country. Speaking to a number of Australian companies which participated in the Austmine and Austrade developed trade mission and the exhibition as well, they said it was a positive experience and has helped them get a foot in the door of one of the largest mining markets in the world.

The trade mission was carried out as a political storm grew in the background, however this didn’t work to deter miners, who were focusing on the longer term goals of taking Australian experience and technology into new and willing markets.

But why Russia? According to Palaris’ Joe Carr “Russian miners are currently seeing a requirement for technical expertise that they just don’t have here,” which includes high end products and experience that many Australian mining and METS companies have.

Bradken added that “there is a real desire for better technology and equipment in the country,” with Gekko’s Nigel Grigg explaining that previously Russia operated with smaller equipment, but lots of it, so now they are looking to larger, single pieces of machinery or technology”.

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Timing mining of Asia food boom – by Stirling Larkin (The Australian – April 26, 2014)

http://www.theaustralian.com.au/business

THE so-called “mining to dining’’ boom is expected to be a significant driver of deal flow in the Asia-Pacific not only for the next decade, but also quite possibly through to 2030 at least. Such changes as a move from minerals to food take a while for many commentators and investors to get used to, as the evidence of previous changes shows.

For instance, some of the most successful international investments made around 2004 spotted how important massive capital expenditure in China was going to be to mining and energy companies in Australia and Canada.

The sectors had underperformed in the 1990s and in 2004 commentators were looking the wrong way, failing most particularly to recognise this sea change and the imminent correlation between Australian and Canadian supply, and Chinese demand.

Those who did see this opportunity yielded strong returns in those following years. The Australia in China’s Century conference, hosted by The Australian, will discuss how important these investments were for the economy and how they have advantageously positioned us for future Chinese and regional opportunities.

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Rio Tinto’s stance on Kakadu cleanup alarms Indigenous owners – by James Norman (The Guardian – April 24, 2014)

http://www.theguardian.com/uk

Giant says rehabilitation of uranium mine – site of a radioactive spill last year – is a matter for its Australian subsidiary

It’s a long way from central London to Kakadu national park in Australia’s Northern Territory. When Rio Tinto’s chief executive, Sam Walsh, addressed shareholders at the company’s annual general meeting last week, there was a strong sense of the distance.

Walsh refused to offer any guarantees that the mining giant would help its Australian subsidiary company Energy Resources of Australia (ERA) clean up the site of its Ranger uranium mine within the park.

“This is a public Australian company and clearly that is an issue for them,” Walsh said. When pressed on the point he added: “We are clearly shareholders, but it is a matter for all shareholders and a matter for the ERA board.” The Ranger mine was in the news in December last year when a leach tank containing 1.4m litres of acidic radioactive slurry leaked.

Walsh’s words were alarming for Mirarr traditional owners who live in the park and are no strangers to negotiating with mining companies. They are anxious about ERA’s commitment to the rehabilitation of the site.

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China’s war on smog will put the reins on global coal demand – by Jeff Rubin (Globe and Mail – April 24, 2014)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

China’s pollution epidemic has finally spurred the country’s leadership to declare a war on smog. It’s about time. Chinese citizens are angry about what’s going into their lungs, while a recent government report says pollution has left 16 per cent of the country’s land unfit for use.

Much of that pollution can be traced back to the billowing smoke stacks attached to China’s fleet of coal-fired power plants. If Beijing is indeed sincere about taking the fight to pollution, then these ageing plants will be on the front line. Global coal producers are already sitting up and taking notice.

China relies on coal for roughly three-quarters of its power generation. Its coal-fired power plants combust nearly as much coal as the rest of the world put together. Coal prices, for their part, are already tumbling in part due to a slowdown in China’s economic growth. Spot prices at Newcastle, Australia, the world’s largest thermal coal exporting terminal, have plunged from a monthly average high of $142 a tonne in January 2011 to $78 a tonne last month.

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BHP still sees [Pilbara] greenfields – by Andrew Burrell (The Australian – April 23, 2014)

http://www.theaustralian.com.au/business

BHP Billiton iron ore boss Jimmy Wilson has dismissed suggestions that the era of multi-billion-dollar greenfields iron projects in the Pilbara has come to an end, even as the mining giant focuses on extracting efficiencies rather than building new mines.

Mr Wilson also refused to be drawn into forecasting the iron ore price amid fears it could tumble in response to patchy Chinese economic data. He said few ¬people had any idea about the outlook for Australia’s most valuable export commodity.

Speaking at the opening of BHP’s $US3.6 billion ($3.9bn) Jimblebar mine near the town of Newman, Mr Wilson said he and his team had “impressed ourselves” by boosting production forecasts from its West Australian operations from 207 million ¬tonnes per annum to 217mtpa for this financial year.

The improved outlook had been achieved through operational improvements, productivity gains and technological innovation rather than any major capital spending. But Mr Wilson rejected suggestions that Jimblebar, along with Gina Rinehart’s $10bn Roy Hill project, could be the last greenfields mines of the Pilbara iron ore boom.

He said the reluctance by miners to allocate billions of dollars towards new mines was driven by the fact that Chinese raw steel production had slumped from a growth rate of 24 per cent almost a decade ago to as low as 3.4 per cent in coming years.

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Iron ore price fears raise earnings alert – by Barry Fitzgerald (The Australian – April 23, 2014)

http://www.theaustralian.com.au/business

FEARS that iron ore prices are set to crumble in response to patchy Chinese economic data and the unfolding 20 per cent annual surge in exports from the Pilbara have re-emerged, forcing investors to place the earnings outlook for leading producers on high alert.

Prices for the key steelmaking raw material were sent sharply down on Monday and were lower again in Chinese futures trading yesterday.

Monday’s fall as measured by The Steel Index was $US3.20 or 2.7 per cent to $US113.30 a tonne. The sharp fall comes just as the producers and investors had grown relaxed on iron ore’s near-term price outlook after it had worked its way back from this year’s low of $US104.70 on March 10.

The latest fall was put down to the rise in stockpiles at Chinese ports to near record levels, along with another easing of bans in India, which have kept as much as 50 million tonnes annually off the seaborne market.

India’s Supreme Court lifted a ban on iron ore mining in Goa but restricted output to 20 million tonnes a year. It follows the lifting of bans in the biggest producing state, Karnataka, capped at 30 million tonnes a year.

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Rio’s Oyu Tolgoi woes deepen – by Matt Chambers (The Australian – April 22, 2014)

http://www.theaustralian.com.au/business

MONGOLIA has stepped up criticism of Rio Tinto over continuing delays to expansion of the pair’s $US11.5 billion ($12.3bn) Oyu Tolgoi copper and gold mine, revealing a big divide still stands in the way of the profitable second stage of the giant mine.

In a letter to Rio chief Sam Walsh leaked to the Mongolian press at the weekend, Prime Minister Norov Altankhuyag chided Rio over behind-the-scenes moves to declare it was seeking an end-of-year extension to project financing for the $US5.1bn underground expansion of Oyu Tolgoi.

Lenders’ commitments for a $US3.6bn financing package for the stalled expansion expired last month because Rio and the government could not agree on Mongolia’s take from the project, access to water, and a $US2bn cost blowout on the first-stage ­expansion.

The disagreement threatens to derail the underground expansion of the project, which is where most of the value is set to be ­realised. The March 27 letter from Mr Altankhuyag, who has declared Mongolia is ready to wrap up the funding, shows the government is unhappy with Rio’s public statements on the project.

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BHP Needs Rebound, Not Spinoffs, Amid Metal Slump: Real M&A – by Angus Whitley and Elisabeth Behrmann (Bloomberg News – April 17, 2014)

http://www.businessweek.com/

A spinoff of BHP Billiton Ltd.’s (BHP) least-loved assets may do little for shareholders of the world’s largest mining company.  BHP, which is wringing out costs after a decade-long mining boom ended, said this month it’s studying “structural options” to help narrow its focus to four commodities including iron ore. With mines aging and new oil and gas fields becoming harder to find, BHP’s return on invested capital has sunk to the lowest since 2003, according to data compiled by Bloomberg.

Separating the nickel, manganese and aluminum assets from BHP probably wouldn’t boost profit at either the new or old entity, said Sanford C. Bernstein Ltd. Profit margins for the unfavored business have evaporated at the bottom of the commodity cycle and CLSA Asia-Pacific Markets said a spun-off company may be valued at $7.5 billion, just 4 percent of Melbourne-based BHP’s market value.

“There’s a long history of the larger companies succumbing to the cyclical pressures,” John Robertson, director at EIM Capital Managers Pty in Melbourne, said by phone. “If you’re going to float off a large chunk of assets that currently have a low return on capital, unless somebody’s got a magic wand, it’s really not going to do much.”

In 2011, as China devoured everything from iron ore to copper to feed economic expansion, BHP’s return on invested capital was 35 percent, Bloomberg data show. The figure slumped to 10 percent two years later because of slower Chinese growth and costs that were still aligned with a resources boom.

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Mining tax: it’s time for all Australians to realise they are being ripped off – by Luke Mansillo (The Guardian – February 19, 2014)

http://www.theguardian.com/uk

The mining boom has resulted in a huge extraction of wealth. Norway has been turning its resource bounty into a fund for future generations, while Australia is dangerously careless with it

Australians are routinely being told that hefty mining taxes would hinder the country’s largest exports of coal and iron ore. This concern about the competitiveness of the industry has been the basis of the Abbott government’s drive to abolish the mining tax. However, it is hard to reconcile this view (key player Gina Rinehart, for example, claimed that Australia was “too expensive to do export orientated business”) with news this week that mining giant BHP Billiton recently increased its profits by 83% to US$8.1bn.

Within the last year alone, there has been a 20% increase in BHP Billiton’s Western Australian iron ore exports. In spite of this enormous growth, the company only paid US$29m in minerals resource rent tax (MRRT). As it stands, the tax is in no way making BHP uncompetitive – its bumper profits are a testament to that.

While mining companies such as BHP Billiton are making a motza, we need to be reminded that 83% of Australian mining operations are foreign owned. The net income balance – the difference between the profits of Australian investing overseas, and profits made by foreign companies in Australia – has suffered as a result of mining companies extracting greater amounts of Australian mineral wealth for foreign owners.

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UPDATE 2-BHP and Australian rivals raise iron ore targets as competition grows – by James Regan (Reuters India – April 16, 2014)

http://in.reuters.com/

SYDNEY, April 16 (Reuters) – Australian miners are racing ahead with plans to expand iron ore production to capture more of the Chinese market for the steelmaking ingredient, amid strong competition from the world’s biggest supplier Vale of Brazil.

Efforts to beat already ambitious output targets comes as a crackdown in China on using commodities as collateral to raise cash risks unleashing iron ore sales from tens of millions of tonnes sitting in Chinese port warehouses, pressuring prices.

Fortescue Metals Group Ltd, which is raising production 57 percent this year, says its needs iron ore prices to stay between $110-$120 a tonne for the next 12-18 months in order to pay off a targeted $2.5 billion in debt.

The Australian Bureau of Resources and Energy Economics forecast an average price of $110 a tonne this year but only $103 a tonne in 2015. By 2016, Citigroup sees the price falling to $80.

Iron ore was quoted at $117.10 .IO62-CNI=SI on Wednesday. BHP, the world’s biggest diversified mining company, on Wednesday lifted full-year iron ore production guidance by 5 million tonnes to 217 million as it pushes ahead with new mine work in Australia.

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UPDATE 2-Bad weather cuts Rio Tinto’s iron ore shipments – by James Regan (Reuters India – April 15, 2014)

http://in.reuters.com/

SYDNEY, April 15 (Reuters) – Rio Tinto’s iron ore shipments fell 8 percent in the first-quarter from the previous quarter due to weather-related disruptions in Australia and Canada, but the miner said it was on track to meet its full-year target.

Production still jumped 16 percent on the same quarter a year ago as the world’s No. 2 iron ore producer behind Brazil’s Vale ramps up production at its Australian mines to meet growing demand from China.

“It appears they were hit a litle harder than we expected by the weather, though we don’t see any issues in meeting their full-year target,” said RBC Capital Markets analyst Chris Drew.

Iron ore has replaced other industrial and precious commodities such as coal, gold and silver as the mineral with the most profit potential, delivering bumper earnings for giant low-cost miners such as Rio and BHP Billiton.

Iron ore prices .IO62-CN=SOI have recovered 12 percent since a steep dip in March on weaker Chinese steel prices. At the current price of $117 a tonne, Rio Tinto enjoys a profit margin of over $60 a tonne.

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COLUMN-BHP’s “unloved” assets may be better long-term bet – by Clyde Russell (Reuters U.K. – April 14, 2014)

http://uk.reuters.com/

LAUNCESTON, Australia, April 14 (Reuters) – “Unloved” was a word that popped up several times in relation to BHP Billiton’s mooted plans to spin-off its non-core aluminium, nickel and manganese businesses.

It’s worth looking at the language used to describe and frame corporate plans as this is more often revealing that the bland statements companies tend to issue.

BHP Billiton didn’t use the word “unloved” itself, that was the description applied by news outlets, among them Reuters, the Sydney Morning Herald and the Wall Street Journal.

What BHP Chief Executive Andrew Mackenzie did say was the world’s largest mining company was looking at a range of options in the “next phase of simplification,” but would only pursue those that enhanced shareholder value.

BHP has identified four key pillars of its business – iron ore, copper, coal and petroleum – with potash a potential fifth. This leaves the so-called unloved assets as aluminium, alumina, bauxite, nickel and manganese.

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