Iron Ore – Page 72 – Republic of Mining

Osisko wades into iron ore amid ‘perfect’ market for royalty companies – by Damon van der Linde (Financial Post – May 15, 2015)

May 15, 2015

The National Post is Canada’s second largest national paper.

MONTREAL – Osisko Gold Royalties Ltd. says it has confidence in its recent acquisition of a stake in Labrador Iron Ore Royalty Corp., even if its shareholders don’t quite know what to make of the investment at a time when the metal’s price languishes near half its value of a year ago.

“We understand that there are cycles and ‘buy low, sell high’ is easy to say but hard to do,” said Osisko CEO Sean Roosen. “In this case and time, when everyone is running for cover, that’s when we want to wade in. I think we bought it right.”

Osisko announced Friday in its quarterly earnings release that it has amassed a 9.75 per cent interest in Labrador Iron Ore Royalty since the start of the year.

“The way we look at this, this gives us a relatively low-risk access to short-term dividend cash flow and that helps us with our numbers,” said Roosen.

Osisko is a mining royalty company, meaning it has agreements giving it the right to a share of income from mines operated by other companies.

COLUMN-Any Australian iron ore inquiry won’t solve major issue – by Clyde Russell (Reuters U.S. – May 15, 2015)

May 15, 2015

http://www.reuters.com/

SINGAPORE, May 15 (Reuters) – Any inquiry into the collapse of iron ore prices by the Australian Senate is likely to provide a great opportunity for political point-scoring for a domestic audience, but won’t address the main issue.

It’s still not clear whether independent Senator Nick Xenophon has enough support from the major parties, the ruling Liberals and the opposition Labor, to launch an inquiry, but he did receive backing for the idea from Prime Minister Tony Abbott.

If any inquiry did go ahead, it would provide a platform for Andrew Forrest, the chief executive of No.4 iron ore producer Fortescue Metals Group, to continue his campaign against the expansions of No.2 and No.3 miners, Rio Tinto and BHP Billiton.

Forrest would most likely relish the chance to continue to portray his company as the tough “Aussie battler” being bludgeoned by heartless multinationals that have failed to act in the interests of Australia and its people.

While this sort of attack may play well in the domestic media arena, it’s also likely that any Senate inquiry would find that BHP Billiton and Rio Tinto haven’t done anything illegal in ramping up iron ore output to levels beyond demand growth.

Prime Minister Tony Abbott’s iron ore inquiry slammed – by Peter Ker and Tess Ingram (Sydney Morning Post – May 15, 2015

May 15, 2015

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

A parliamentary inquiry into the iron ore industry would be entirely inappropriate and damage Australia’s international image, former Australian Competition and Consumer Commission chairman Graeme Samuel says.

Speaking after Prime Minister Tony Abbott declared his support for an inquiry into the behaviour of the struggling industry, Mr Samuel said the parliament should not be trying to intervene in a global market.

“I don’t know what parliament thinks it can do, is it going to limit the exports of BHP and Rio Tinto? I can’t imagine what role parliament has in dealing with an international market of this nature,” said Mr Samuel.

“The very reason we have independent competition authorities is to ensure politicians don’t get involved in political situations. This is an attempt to intervene in the market in a way that is entirely innappropriate.”

Mr Samuel’s comments come after ACCC chairman Rod Sims said last month it was “misguided” to think BHP and Rio were engineering the recent price fall.

Insight – Global glut threatens West African iron ore ambitions – by Umaru Fofana (Reuters U.K. – May 15, 2015)

May 15, 2015

http://uk.reuters.com/

PEPEL, SIERRA LEONE – Red piles of iron ore and rusting railway wagons in the deserted stockyard at the port of Pepel bear silent witness to a crisis engulfing Sierra Leone’s mining industry and threatening others across West Africa.

The conveyor belt out to the jetty on the slow-moving Rokel river has remained idle for most of the past few months as only a handful of ships have anchored at the moribund port.

At the height of the commodities boom last decade, West African countries became magnets for miners seeking untapped iron ore, diamonds, gold, bauxite and other minerals.

In Pepel, locals anticipated an economic surge for their civil war-ravaged country when London-listed firm African Minerals (AMLZF.PK) started shipping ore four years ago from its Tonkolili mine.

Discovered in 2008 and lying some 200 km (124 miles) to the northeast, Tonkolili is one of the world’s largest iron ore deposits.

Western Australia Budget Deficit Shows Boom Turning to Bust – by Jason Scott and Benjamin Purvis (Bloomberg News – May 14, 2015)

May 14, 2015

http://www.bloomberg.com/

The state at the forefront of Australia’s biggest resources boom since the 1850s gold rush forecast a worsening budget deficit next year as plunging commodity prices hit revenue.

Western Australia’s government said its net operating deficit for the year ending June 30, 2016 will double to A$2.71 billion ($2.2 billion), from a A$1.29 billion gap in 2014-15, which was its first shortfall in 15 years. Economic growth is forecast to slow to 2 percent in the next fiscal year, the lowest rate since 1990-91, while net debt will peak at A$36.3 billion in June 2018.

Treasurer Mike Nahan is turning to asset sales to reduce debt as a 39 percent fall in iron ore prices in the past 12 months hits the state’s finances. Standard & Poor’s put Western Australia on notice last month that it may cut its AA+ rating due to falling mining royalties that are weakening its budget position.

‘There’s a sober realization now in the state that things have changed,’’ said Michael McLure, a professor of economics at the University of Western Australia Business School. “The government now has a growing debt problem that it’s trying to manage at a very difficult time.”

BHP Rejects Supply Restraint in Iron After Glasenberg Salvo – by Jasmine Ng, Martin Ritchie and Jesse Riseborough (Bloomberg News – May 14, 2015)

May 14, 2015

http://www.bloomberg.com/

BHP Billiton Ltd. defended its strategy of expanding iron ore output into an oversupplied market as prices decline, saying that the company’s approach was rational and it wouldn’t countenance cutting back on output.

“Our performance will be dependent on being the most efficient supplier and it shouldn’t be dependent on supply restraint,” Alan Chirgwin, iron ore marketing vice president, told a conference. “We have high-quality resources. We have a management team that’s operating in a very cost-disciplined way. We should be taking advantage of those things.”

Iron ore slumped 40 percent in the past 12 months as BHP and Rio Tinto Group in Australia and Brazil’s Vale SA expanded low-cost output to boost sales volumes and cut costs, spurring a surplus as China slowed. The strategy drew criticism from rivals including Fortescue Metals Group Ltd. and Glencore Plc, which said that the approach damages the industry. It’s also drawn flak from political leaders including Colin Barnett, the premier of Western Australia where BHP and Rio operate mines.

“What we’re doing very clearly is we’re operating our enterprise in a very economically rational way,” Chirgwin said in Singapore on Thursday. “We took action, so it wasn’t just words. In 2011, that’s the last time our board approved billions of dollars of additional investment in expansion.”

Iron ore is not like oil – by Jonathan Ratner (National Post – May 14, 2015)

May 14, 2015

The National Post is Canada’s second largest national paper.

Investors may be tempted to think the recent increase in oil prices foretells similar gains in iron ore, but Ben McEwan at CIBC World Markets says these expectations are based more on hope than anything of substance.

For one thing, the analyst found little historical correlation between the two commodities since it is lower than the correlation between other industrial commodities such as copper, nickel, aluminum and metallurgical coal. Over both 12- and five-year periods, only met coal demonstrates a lower correlation to oil than iron ore.

There is also an argument that large iron ore producers are on the verge of supply-side discipline, which should support prices as it has in the oil sector.

McEwan compared Saudi Arabia’s position in the oil market to China’s in the iron ore sector, noting that both are significant producers that have avoided making material output cuts. “However, this is where the similarities end,” the analyst said.

Chinese iron ore production remains near the top of the cost curve, while Saudi oil production is far more economically even at lower oil prices.

Anglo Should Exit Iron Ore for its Shareholders, Investec Says – by Firat Kayakiran (Bloomberg News – May 12, 2015)

May 13, 2015

http://www.bloomberg.com/

Anglo American Plc should sell its iron-ore assets and focus on diamond and platinum operations for the benefit of its shareholders, according to Investec Plc. The producer of minerals from Australia to Brazil could raise as much as $4.66 billion selling assets in South Africa and Brazil, analysts Marc Elliott and Hunter Hillcoat said.

“A disposal of the entire iron ore portfolio would be a game changing transaction, strengthening the balance sheet, reducing the risk profile of the group and potentially enabling a substantial re-rating,” the analysts said in a note.

Iron-ore prices reached a decade low of $47 a metric ton on April 2 before rebounding to $59. Investec forecasts prices will average $55 a ton this year before rising to $80 a ton by 2019.

Anglo, which owns about 70 percent of Kumba Iron Ore Ltd., Africa’s largest producer of the steel-making raw material, in October began shipments from its Minas-Rio mine in Brazil as prices slid after the largest producers including BHP Billiton Ltd. expanded capacity amid slowing demand from China.

Chinese iron ore mines face ‘annihilation’ as BHP, Rio Tinto, Vale boost output – by Jasmine Ng, Feiwen Rong and Jesse Riseborough (Sydney Morning Herald – May 13, 2015)

May 13, 2015

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

Iron ore production in China is poised to shrink further as cheaper imports and faltering demand threaten to close mines supplying mills in the top steelmaker. Most private mines in China have costs that are too high and produce ore of too low a quality to survive, according to Sanford C Bernstein & Co. Output that fell 20 per cent to 311 million metric tons last year would drop to 271 million tons this year and shrink further next year, Goldman Sachs said.

Iron ore retreated 39 per cent over the past 12 months as Australia’s Rio Tinto and BHP Billiton as well as Brazil’s Vale SA boosted low-cost production to cut costs and protect market share, spurring a glut as China slowed. The outlook for supply, and consequences for miners in China, will be in focus on Thursday as executives from the biggest producers address a conference in Singapore. BHP chief executive officer Andrew Mackenzie warned on Tuesday that lower prices were here to stay.

Georgi Slavov, head of basic resources research at Marex Spectron Group, said in an email: “Mines not part of larger cash or credit line-rich steel groups are facing annihilation. Utilization in China keeps dropping, which means more and more mines are struggling to meet the ends and produce.”

Fortescue founder asks Australians to fight Rio, BHP iron ore plans – by James Regan (Reuters U.S. – May 11, 2015)

May 11, 2015

http://www.reuters.com/

SYDNEY – May 11 Fortescue Metals Group Chairman Andrew “Twiggy” Forrest on Monday called on Australians to urge the government to stop expansion plans by iron ore miners Rio Tinto and BHP Billiton, saying they were jeopardizing the economy.

The plea by the billionaire philanthropist and founder of the world’s fourth-biggest iron ore miner was condemned by the national mining lobby, the Minerals Council of Australia, for threatening to set the country on an “interventionist path.”

Forrest has accused Rio and BHP of over-producing to drive out competitors from the $60 billion-a-year Chinese import market despite Fortescue quadrupling its own production in the last seven years.

“These big companies say they must flood the market next year and the year after and the year after even though it will crash the price further,” Forrest said in an editorial in Sydney’s Daily Telegraph. “Every time they say this the price falls again.”

Iron ore prices .IO62-CNI=SI are trading off their lows at $60.50, but still 55-percent under last year’s peak. For every $1 price fall, the Australian economy lost A$800 million ($632 million) in foreign income, according to Forrest.

Vale to divide and conquer by lifting high-grade iron ore output – by James Wilson (Financial Times – May 10, 2015)

May 11, 2015

http://www.ft.com/intl/companies/mining

Vale is keen to build up its supply of higher-quality iron ore in a move that could increase pressure on some rival producers in the global market for the steelmaking commodity.

The Brazilian miner is one of a quartet of companies that dominate the global market in iron ore, where prices have plummeted over the past year as a glut of supply — mainly from Australian producers — has encountered weakening Chinese demand.

Vale’s recent indications that it would be prepared to hold back some supply have helped to arrest the slide in the iron ore price, while underpinning a rally in the company’s shares in the past month.

In an interview Luciano Siani, chief financial officer, did not rule out Vale cutting its growth plans for next year. The miner expects to produce 340m tonnes of iron ore this year and has previously estimated that 2016 output will be 376m tonnes.

However, Mr Siani said Vale would be likely to “push to the fullest” its production of the highest grade of iron ore, which commands a premium price from steelmakers. By contrast Vale would be more likely to “manage” its more “standard” iron ore supplies, he said.

Waterloo Region reaps dividends by being conduit to Baffin Island – by Greg Mercer (Waterloo Region Record – May 9, 2015)

May 11, 2015

http://www.therecord.com/waterlooregion/

BRESLAU — The sun is just starting to peek above the horizon as a handful of men in work boots suck on their last cigarettes outside the airport terminal, getting ready for the long commute.

In a few minutes, they’ll join dozens of others boarding the Boeing 737 for the five-and-a-half hour charter flight to Mary River, Baffin Island — where a small army of pipe fitters, machinists, cooks, engineers and other tradespeople are helping build and supply one of the world’s largest and most ambitious iron ore mining projects.

For hundreds of workers passing through the Region of Waterloo International Airport three times a week, Waterloo Region is a southern hub for the buried riches of the Far North. And that connection is pumping millions into the local economy.

The Mary River Project, run by an Oakville-based company called Baffinland, aims to move its first shipment of iron ore — the main raw material used to make steel — this summer.

The ore deposits in that part of Baffin Island, first discovered by a prospector in 1962, are so rich and pure they’re the stuff of legend. Pilots used to report the minerals would scramble their compasses as they flew over.

The Betrayal of Brazil – by Michael Smith, Sabrina Valle and Blake Schmidt(Bloomberg News – May 8, 2015)

May 8, 2015

http://www.bloomberg.com/

As a massive corruption scandal unfolds, Brazilians are facing some stark truths: The powerful and connected are still dividing the country’s riches among themselves. The past decade’s economic miracle was in large part a mirage. And the future is again on hold.

In mid-2013, Brazilian federal police investigator Erika Mialik Marena noticed something strange.

Alberto Youssef, suspected of running an illicit black-market bank for the rich, had paid 250,000 reais (about $125,000 at the time) for a Land Rover. The black Evoque SUV ended up as a gift for Paulo Roberto Costa, formerly a division manager at Brazil’s national oil company, Petrobras. “We were investigating a money-laundering case, and Petrobras wasn’t our target at all,” says Marena. “Paulo was just another client of his. So we started to ask, ‘Why is he getting an expensive car from a money launderer? Who is that guy?’”

Marena had spent the previous decade building cases against money launderers, and Youssef had been a perennial target. He’d been arrested at least nine times for using private jets, armored cars, clandestine pickups by bagmen, and a web of front companies to move illicit cash. But Youssef had been spared serious jail time by testifying repeatedly against other doleiros, Brazilian slang for specialists in laundering unreported cash.

Essar ramps up construction [Iron Range] – by Beth Bily (Business North.com – May 8, 2015)

May 8, 2015

http://www.businessnorth.com/news.asp

The business news source for Northeastern Minnesota and Northwestern Wisconsin.

While recent news about price, demand and employment hasn’t been favorable for Iron Range mining operations, the largest mining construction project here during this century is nonetheless moving ahead, executives say.

Essar Steel Minnesota, a $1.9 billion project located north of Nashwauk on the former Butler mining site, is ramping up for a summer of large-scale activity with the goal of completing construction on the taconite mine by the end of this year. It’s permitted to produce 7 million tons of taconite pellets annually and is expected to operate for approximately 80 years.

Reestablishing mining operations here has been decades in the making. Butler ceased production at the site in the mid-1980s. Later, various would-be developers announced plans to reopen the site to mining. But for years, the plans never made it off the drawing board. That changed in 2007, when India-based Essar purchased what was formerly known as Minnesota Steel Industries.

At a ground breaking for Essar Steel Minnesota in 2008, executives then promised a mining operation that would be up and running within 27 months.

Glencore blames rivals for creating metals glut – by Silvia Antonioli (Reuters U.K. – May 7, 2015)

May 8, 2015

http://uk.reuters.com/

LONDON – The head of global mining and trading company Glencore (GLEN.L) said rivals were to blame for an oversupply of metals which depressed its share price.

Despite a partial recovery in the last few months, Glencore’s shares are down about 6 percent from a year ago, under pressure from a rout in prices for most of the commodities it produces and trades.

“Unfortunately our competitors in the world have produced more supply than demand and commodity prices are down for that reason,” Glasenberg said at the company’s annual meeting.

“I am doing my level best to convince my competitors we should understand the words demand and supply,” he added in response to a question from an investor about the share price.

Glasenberg has criticised rivals such as Rio Tinto (RIO.L) and BHP Billiton (BLT.L) (BHP.AX) at various times, blaming them for oversupplying the market, particularly in iron ore, a commodity Glencore has little exposure to.