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Iron Ore

Rio Tinto chief Sam Walsh tells rivals to stop sledging – by by James Chessell (Australian Financial Review – July 2, 2015)

http://www.afr.com/

Rio Tinto chief executive Sam Walsh may not have mentioned Fortescue Metals Group or Glencore by name.

But the rival mining companies were clearly on his mind as he delivered the speech at the Melbourne Mining Club’s annual gathering in London on Wednesday.

Addressing a 560-strong crowd packed into a marquee next to Lord’s Cricket Ground, Mr Walsh said 2015 had been characterised by “a lot of commentary, free expert advice, and even some sledging”.

Mr Walsh, who has held the top job at Rio since January 2013, said it was in Australia’s national interest to stick to the principles of open markets at a “challenging” time for many commodities, including iron ore, coal and aluminium.

“Some have called it a crisis of confidence and talked themselves and others into a gloom,” he said.

“It’s been suggested to me there’s a direct correlation between your position on the cost curve and the volume of your opinion. The higher on the curve, the louder you get.”

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Gina Rinehart’s Roy Hill Tells Workers To Take Pay Cut To Keep Jobs – by Anne Lu (International Business Times – June 26, 2015)

http://www.ibtimes.com.au/

Australia’s richest person has told her employees to take a pay cut or lose their jobs. Gina Rinehart’s Roy Hill project will cut pay rates for its employees to avoid job losses.

The $10 billion company will be deducting 5 to 10 percent from the salaries of about 60 percent of its workforce in a bid to save its employees. It will also offer lower salaries to new workers. The move is expected to affect about 540 workers, with the upper management group taking the biggest cut, though it will spare existing employees in the lower remuneration bands.

According to Barry Fitzgerald, the company’s chief executive, the decision was made after reviewing the cost base. The pay cuts, which he said was approved by the workers through a survey, was to maintain the “family-friendly roster,” which is 14 days on with 10 days off, and 14 days on with 11 days off. He said the roster was what attracted a number of people to join the company recently.

“We felt it was more important for our people to retain their job rather than pursue workforce reduction as a cost-saving strategy in response to market conditions,” Fitzgerald, who will be getting a 10 percent cut from his pay, said. He further explained that cutting salaries was a practical decision they agreed on to keep the company competitive over the long term.

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On the Iron Range, a push for a new kind of iron – by Dan Kraker (Minnesota Public Radio News – June 24, 2015)

http://www.mprnews.org/

Duluth – For more than a century, iron ore mined from Minnesota’s Iron Range and formed into taconite pellets has fed enormous blast furnaces at steel mills around the Great Lakes in old rust belt cities like Chicago, Detroit, Cleveland and Hamilton, Ontario.

After the iron ore is combined with coal and limestone in 12-story-high stacks, the mixture is heated to more than 2,600 degrees to create the molten iron needed for steel. That steel has helped manufacture everything from toy wagons to pickup trucks.

But in the few months since steel companies on the Iron Range laid off about 1,000 mineworkers — one out of every five workers in a region where mining makes up about a third of the economy — two trends in the steel industry have Iron Range watchers feeling uneasy.

Even as officials contend with the current downturn, many worry about a longer-term question with even larger economic consequences. At issue is whether Minnesota is producing the right kind of iron ore product for a changing steel industry.

First, the blast furnaces that Minnesota taconite pellets feed are disappearing, said Brian Hiti, a senior policy adviser on mining for the Iron Range Resources and Rehabilitation Board.

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Vale Looks to Sell Up to 30% of Metals Unit in Possible IPO – by Juan Pablo Spinetto (Bloomberg News – June 24, 2015)

http://www.bloomberg.com/

Vale SA, the world’s largest nickel producer, is considering selling about 25 percent to 30 percent of its base metals business in an initial public offering.

Work on the transaction continues, although the Rio de Janeiro-based miner will only proceed if nickel and copper prices reach “appropriate” levels, Investor Relations Director Rogerio Nogueira said in Sao Paulo Wednesday.

“We have the vision of doing this IPO to create value,” he said. “It was never thought as a way of getting cash.”

Vale, whose iron-ore business has been buffeted by a 50 percent price collapse since late 2013, may hold the base metals offering in two tranches as it seeks to unlock value at a time of rising profit and output after years of operational setbacks. Vale hired Canadian law firm Stikeman Elliott LLP for the possible IPO, people with knowledge of the matter said earlier this month.

While Nogueira declined to give a valuation for the base metals business during his presentation, Chief Financial Officer Luciano Siani said in a Bloomberg Television interview in December that it may be worth $30 billion to $35 billion.

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Dust from abandoned Cliffs’ mine casts pall over eastern Canadian town – by Mike De Souza (Reuters U.S. – June 19, 2015)

http://www.reuters.com/

OTTAWA – Heavy dust clouds blowing from Cliffs Natural Resources’ abandoned Wabush iron ore mine into a small township in the eastern Canadian province of Newfoundland and Labrador is putting a focus on the liability of miners that seek creditor protection and walk away from assets.

Iron ore and coal miner Cliffs Natural Resources Inc announced in February 2014 it was shutting down its Wabush mine. This year it sought creditor protection for its Canadian assets.

The fate of the deserted mine is in limbo until it is either acquired by a rival or Cliffs is able to restructure and exit creditor protection.

Local residents say the abandoned site has many open pits, with drilling equipment, trucks and other equipment stranded on the site.

“Now that the company has gone into closure, it is very hard to maintain a relationship with them. From a corporate level, we have not heard anything from them in almost a year, if not longer,” said Colin Vardy, mayor of the town of Wabush.

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A missed opportunity for marginal iron ore producers – by Stephen Bartholomeusz (The Australian – June 22, 2015)

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

Has the slide in the iron ore price over the past week signalled the closing of a small window for the recapitalisation of marginal producers?

For a few weeks the price had been firming to hold around the $US64 a tonne level, well above the $US47 a tonne seen earlier this year when the collapse in the price was seen as the death-knell for smaller and higher-cost producers. It was that plunge that triggered the failed Fortescue Metals campaign to try to force/coerce Rio Tinto and BHP Billiton into winding back their production.

But over the past week, the price, which had seen some previously mothballed production brought back into the market, has slipped back towards $US60 a tonne. That raises the possibility, indeed probability, that the firming of the price was an aberration.

The most likely explanation for the bounce in the price is that supply disruptions in April and May caused by weather affecting output from the Pilbara and the timing of shipments from Brazil coincided with a low-point in the inventory cycle of China’s steel producers. If that were the case, it would be a temporary phenomenon.

If the edging down in the price over the past week does reflect a gradual return to settings that better reflect the underlying balance of supply and demand, the period that preceded it could represent a missed opportunity for some of the smaller players trying to survive and position themselves for a potentially very prolonged period of much lower prices.

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Why would we choose not to make money? Rio’s iron ore boss speaks out – by Vicky Validakis (Australian Mining – June 22, 2015)

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

Rio Tinto’s iron ore boss Andrew Harding says long-term demand for the commodity is strong, but warned high-cost producers would not last long in the current market.

Speaking to Rio’s M2M magazine, Harding said while demand growth for iron ore isn’t as strong as it was, the long-term outlook was sound.

Pointing to the continued urbanisation of people in China, India, Africa, and South America, Harding said the need for steel would remain strong.

“As developing countries urbanise, and people move from rural to urban ways of life, infrastructure needs change. They build tall apartment blocks and link up the urban areas with roads, railway lines, airports and bridges – all using massive amounts of steel,” Harding said.

Harding also highlighted the importance of demand from the developed world in replacing ageing infrastructure.

“Even though Japan, for instance, has had no to very low growth for a considerable period, it’s still been importing around 130 million tonnes of iron ore every year,” Harding explained.

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Canadian mining industry feeling the sting from China’s steel surplus – by Rachelle Younglai (Globe and Mail – June 22, 2015)

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.

The steel industry is about to go from bad to worse. China, the world’s biggest consumer of steel, needs less metal. The Chinese housing market, responsible for using the bulk of steel, is bulging with empty properties.

As a result, the country, also the largest steel producer, is swimming in the metal and exporting more to get rid of it.  “Things are getting worse and I don’t see any possibility of a rebound in under three years,” said Tim Murray, managing partner with investment adviser J Capital Research Ltd.

“What I have seen actually is a deepening of the crisis.” Although the country is aiming for economic growth of 7.5 per cent – a healthy clip that miners hope will help turn the commodities market around – there are alarming signs China is struggling with the overcapacity in its steel industry.

Last year, China’s steel exports jumped 50 per cent. The surge came in the same year that steel consumption eased 3 per cent, according to the World Steel Association.

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BARRON’S INTERVIEW: Fortescue’s Andrew Forrest Battles on in Iron Ore War – by Robert Guy (Barrons Magazine – June 17, 2015)

http://online.barrons.com/home-page

Billionaire chairman of Fortescue Metals Group on iron ore, China and why he thinks the miner is worth more.

If there’s anyone that understands the joy and the inevitable pain of the waxing and waning of commodity cycles, it is Andrew Forrest.

Having topped the ranking of Australia’s wealthy in 2008 with an estimated fortune of over AUD9 billion, the billionaire founder and chairman of Fortescue Metals Group has watched his fortune – built on a 30% stake in the world’s fourth largest iron ore miner – shrink to a AUD2 billion as the price of the steel making ingredient has tumbled from a record $180 a tonne in 2011 to around $60 a tonne.

Not that he seems worried about the hit to the hip pocket when Barron’s Asia caught up with the one of Australia’s most colorful business identities on Wednesday. Forrest, who is also known by his nickname “Twiggy”, has a deep appreciation of how fortunate he is, with the mining mogul visiting Hong Kong to promote his anti-global slavery foundation, Walk Free.

“We can’t solve everything, so we’re going after one thing and that’s freedom.

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Our view: We’ll all be helping struggling iron mines (Duluth News Tribune – June 15, 2015)

http://www.duluthnewstribune.com/

After a staggering 1,000-plus announced layoffs over recent months, Northeastern Minnesota’s iron-mining industry clearly needs a boost. Thanks to the Minnesota Legislature, every time any one of us flips on a light switch we’ll help provide it.

An energy-jobs bill passed during Friday’s special session authorized lower electrical rates for iron mines and other big energy guzzlers. They’ll pay less, leaving us little-guy residential and commercial power users to pay more to make up for it.

While this fact probably won’t help ease the pain of opening your Minnesota Power bill in the near future, for years, the utility said, the guzzlers have been paying more and the rest of us have been enjoying more-affordable rates as a result. We’ve had it good for some time. When Minnesota Power last raised rates in 2011, for example, state regulators approved a 4 percent increase for residential customers and a 16 percent increase for mines and other large industrial customers, as the Star Tribune reported Friday.

So the legislation approved Friday simply allows Minnesota Power to set rates more in line with actual energy use — for both big and small customers, said Pat Mullen, Minnesota Power’s vice president of marketing and communications.

“We have some of the lowest (electrical) rates (for residential customers) in the nation.

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Shouldn’t India, like China, consider buying Australian iron ore assets? – by Kunal Bose (Business Standard – June 15, 2015)

http://www.business-standard.com/

Chinese iron ore production this year is likely to fall below 200 mt from 240 mt in 2014

The world is aware that Chinese steelmakers and investment groups are circling around distressed iron ore assets in Australia with a view to gaining control. Nothing surprising about the recent Chinese moves since these are part of by-now-long-established strategy of the world’s largest producer and consumer of steel to secure future supply of iron ore.

But shouldn’t some of our large producers of steel, which were forced to import rising quantities of iron ore in the past three years due to court-imposed curbs aimed at ending illegal mining, also consider buying assets in Australia and elsewhere when their valuations are so low? India, which not very long ago was the world’s third largest exporter of ore, had to import 15.5 million tonnes in 2014-15 to supplement reduced domestic supplies. Our steelmakers would often complain about domestic ore suppliers charging premiums over world prices.

What will also be a justification for them to seek a presence in Australian iron ore landscape is the difficulty in securing iron ore deposits here and then long gestation in opening mines. This is despite the country sitting on the world’s sixth largest iron ore resources estimated at well over 25 billion tonnes (bt). Business wanderlust led Indian groups in the past to acquire mines in more than one continent, though not all proved to be prized catches.

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From Loathed to Loved: Iron Rallies as Quality Ore Is Gobbled Up – by Phoebe Sedgman (Bloomberg News – June 11, 2015)

http://www.bloomberg.com/

Iron ore’s gone from loathed to loved. The commodity capped a third weekly gain that lifted prices to the highest in almost five months on lower port stockpiles in China and speculation local production is contracting.

Ore of benchmark-grade 62 percent content delivered to Qingdao climbed 1.1 percent this week for the longest weekly run since April, according to Metal Bulletin Ltd. The commodity retreated 0.7 percent to $65.13 a dry metric ton on Friday after reaching $65.61 on June 11, the highest since Jan. 23.

Iron ore’s roller-coaster ride this year saw prices sink to a decade-low in early April on rising low-cost supply from the top producers and concern demand in China may falter as growth slowed. Tumbling stockpiles in the biggest buyer, as imports missed expectations, helped to spur back-to-back gains in April and May, and prices extended the rally into June. Goldman Sachs Group Inc. is among banks predicting the factors that hurt prices in the first quarter will soon reassert themselves.

“There’s been a significant destocking gone on and that would be why we’ve seen the iron ore price rising, seasonal factors and the fact that they are destocking,” said David Lennox, a resource analyst at Fat Prophets in Sydney. “There’s a lack of inventory in China.”

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Fitch downgrades outlook on BHP Billiton and Rio Tinto on iron ore price (Sydney Morning Herald – June 11, 2015)

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

Rating agency Fitch downgraded its outlook on BHP Billiton and Rio Tinto from stable to negative, after revising down its price assumptions for iron ore, copper and nickel earlier this month.

BHP Billiton, the world’s largest mining firm, held its A+ rating but Fitch said on Wednesday the spin-off last month of some of its assets into a new company named South32 would have a marginally negative effect on its credit rating in the near term, weighing on projected free cashflow generation.

The outlook downgrade on A- rated Rio Tinto, the world’s second-largest mining firm, was on the back of weaker price expectations for iron ore, its main product.

“Although Rio Tinto benefits from a leading iron ore cost position, the high percentage of revenue and (earnings) generated by that single commodity exposes the company to significant risks,” Fitch said in a statement.

The rating agency confirmed its negative outlook on BBB- rated group Anglo American.

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Iron to Tighten as China Buys More and Sells Less, Vale Says – by Juan Pablo Spinetto (Bloomberg News – June 10, 2015)

http://www.bloomberg.com/

The global iron-ore market is set to tighten in the second half of the year as China imports more and produces less, according to the biggest miner, Vale SA.

Chinese imports of the steel-making ingredient will increase with domestic production down by about 200 million metric tons after prices tumbled 60 percent from a 2013 peak, Vale Chief Executive Officer Murilo Ferreira said at a Rio de Janeiro conference organized by Fundacao Getulio Vargas.

“Several Chinese producers — a higher number than people realize — have already left the business,” Ferreira, 61, said Wednesday. “I think we will have a better second half in China than the first half in terms of steel.”

Since reaching a decade low in April amid supply expansions in Australia and Brazil, iron-ore prices have rallied 39 percent on prospects of a pickup in Chinese steel demand and as high-cost mines close. The benchmark rose 1.7 percent to $65.39 a dry ton on Wednesday, the highest since Jan. 23, according to an index compiled by Metal Bulletin.

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Inuit orgs join chorus opposing Nunavut mining exemption (Nunatsiaq News – June 9, 2015)

http://www.nunatsiaqonline.ca/

QIA and NTI pen joint letter to federal minister supporting land use plan process

Baffinland Iron Mines Corp. has proposed to bypass some serious red tape in Nunavut’s regulatory process — but two Inuit organizations are trying to stop the mining company in its tracks.

Baffinland wants to ship 12 million metric tons of iron ore to Europe for 10 months of the year as part of its Phase 2 project proposal — something the Nunavut Planning Commission, said no to last April.

Baffinland has requested an exemption to the NPC’s regulatory process that could be granted by Bernard Valcourt, the Aboriginal Affairs and Northern Development minister.

The company wants to go straight to the Nunavut Impact Review Board for environmental impact assessment hearings instead. Nunavut Premier Peter Taptuna supported that bid in a letter to Valcourt last week.

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