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Iron Ore

With mine layoffs coming, Iron Rangers prepare for hard times – by Dan Kraker (Minnesota Public Radio News – April 22, 2015)

http://www.mprnews.org/

The Iron Range – Every year, Doug Ellis sells hundreds of pairs of expensive steel-toed boots to miners, and a lot of hunting rifles.

“My business is built on mining money,” said Ellis, who owns the Virginia Surplus sporting goods store. “It’s what drives all these towns.” Ellis has operated the store in Virginia for 25 years, through three downturns in the mining industry.

People on the Iron Range are used to the booms and busts of the cyclical mining industry. But the latest downturn has Ellis and many others worried. They’re bracing for the impending layoffs of 1,100 mineworkers later this spring. The job losses likely will significantly affect a regional economy that relies heavily on mining.

The loss of 1,100 jobs on the Iron Range might not seem like much compared to the 3,100 jobs that Target eliminated in the Twin Cities last month.

But in a region where mining makes up about 30 percent of the economy, the impact of the layoffs is enormous, said John Arbogast, vice president of the United Steelworkers union Local 1938 at Minntac in Mountain Iron. “On the Iron Range, mining is everything,” Arbogast said.

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Iron ore price crash erases $74b in market value – by Tess Ingram (Sydney Morning Herald – April 20, 2015)

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

The plummeting iron ore price has wiped $74 billion from the value of Australia’s key iron ore mining stocks since January 2014, and analysts expect share prices to continue their decline as the price for the commodity slides.

Investors that held on to the stocks while the price for iron ore sank during the past 15 months are now nursing losses in value of as much as 92 per cent.

Together, BHP Billiton, Rio Tinto, Fortescue Metals Group, Mount Gibson Iron, Atlas Iron, BC Iron, Arrium and Grange Resources suffered enormously as ore prices slumped 60 per cent from $US134 a tonne in January 2014 to $US50.93 a tonne on Friday.

A combined $73.7 billion, or 22 per cent of value, has been erased from their market capitalisations since January 2, 2014.

Excluding the diversified big miners, BHP Billiton and Rio Tinto, the combined market value of the six remaining companies has declined 71 per cent or $17.2 billion.

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World’s Lowest Cost Iron Ore Miner Turns Screw on Rivals – by Jesse Riseborough (Bloomberg News – April 17, 2015)

http://www.bloomberg.com/

Rio Tinto Group Chief Executive Officer Sam Walsh is fast becoming the worst nightmare of rival iron-ore producers starved of cash.

Iron ore prices have slumped by more than half in a year on a deepening global supply glut. That’s pushed some into bankruptcy and left others on life support. News that the lowest-cost producer is mining a ton of ore even more cheaply signals a more protracted price slump.

After achieving an industry-leading $19.50 a ton last year, currency movements and a drop in fuel costs mean Rio Tinto is now producing at $17, Walsh told investors in London on Thursday. The company is still seeking ways to ship it to Asian buyers more cheaply, he said.

“I know there’s a lot of controversy,” Walsh said. “I know that there’s a lot of late entries into the market who have taken advantage of higher prices and they are now feeling the impact of that as prices have come down. ‘‘This is rational, normal economics,’’ he said. ‘‘This is what physically happens across a range of commodities not just iron ore. It’s a process that we and others have got to work through.’’

The strategy, employed by the world’s largest producers, of continuing to expand output in the face of a price rout has earned the ire of some analysts, investors and loss-making rivals. Rio’s main competitor BHP Billiton Ltd. has described the tactic as ‘‘squeezing the lemon.”

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Activist leads America’s biggest iron miner out of Ring of Fire, but not danger – by Stephen Gandel (Fortune Magazine – April 16, 2015)

https://fortune.com/

Hedge fund Casablanca Capital took over mining company Cliffs Natural eight months ago. So far, it’s not going so well.

These days, activist investors paint themselves as Wall Street’s turnaround specialists. Activists’ track record at getting companies to boost their share buyback programs, hand over board seats, or put themselves up for sale has been impressive. But when it comes to actually turning around a troubled company, or steering a company away from trouble, the jury on activism is still out.

Last July, activist hedge fund Casablanca Capital won control of the board of mining company Cliffs Natural Resources CLF -3.63% after a six-month proxy fight. Days later, the hedge fund installed a new CEO and said that it had a new strategy to increase shareholder value. Eight-and-a-half months later, Cliffs’ stock has plunged 69%. So much for increasing shareholder value.

To be sure, Casablanca’s biggest problem has been commodities prices, which are out of the hedge fund’s control. Cliffs is the largest U.S. miner of iron. And iron prices in 2014 fell nearly 50% in 2014. That drop has taken Cliffs’ cashflow with it.

But Cliffs was also over leveraged. And it may have tried to do too much too soon. The hedge fund may have also underestimated how hard it would be to compete against its larger and more diversified competitors, such as Rio Tinta Group and BHP Billiton.

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Australia steeled for China slowdown as iron ore prices fall – by Jamie Smyth (Financial Times – April 16, 2015)

http://www.ft.com/home/us

Sydney – The last time Western Australia was engaged in a dispute with Canberra of this magnitude, it threatened to secede during a financial crisis sparked by the 1930s Depression.

The current friction is linked to China’s slowdown — a sign of how closely Australia’s fortunes are tied to Beijing’s appetite for its commodity exports.

“It’s not secession but it is tension and disengagement,” Colin Barnett, Western Australia’s premier, said this week when Canberra and other states rejected a request to help plug a widening hole in the state budget caused by plunging iron ore prices.

Western Australia is a mining state that enjoyed a decade-long boom selling iron ore — a key ingredient in steel — to China. Known by some as “China’s quarry”, the state hosts BHP Billiton, Rio Tinto and Fortescue Metals Group, which have spent billions of dollars building mines, railways and ports to almost double iron ore production to 717m tonnes over the past five years.

But just as global supply hits record levels, China’s economy is slowing and its desire for the reddish-brown ore may have plateaued.

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NEWS RELEASE: Mining vs. Aboriginal Rights in Canada – Rio Tinto told to pay its rent to the Innu People

LONDON, UK, April 16, 2015 /CNW Telbec/ – Three First Nations chiefs, dressed in traditional garb and aware of the historic nature of their action, have come to London to address the shareholders of mining giant Rio Tinto directly during their annual general meeting in today, April 16, 2015. On the floor of the meeting, they asked Rio Tinto’s president and CEO, Sam Walsh, and its board of directors to intervene to end a longstanding conflict between the Innu Nation in Quebec, Canada, and mining company IOC, majority owned by Rio Tinto.

Inspired by Midnight Oil’s Beds Are Burning, a political song demanding the return to Australian aboriginals of ancestral lands stolen 200 years earlier by British colonists, the Innu chiefs informed Rio Tinto that “it’s time to pay the rent,” 60 years after exploitation of their territory began.

Supported by international law recognizing that indigenous peoples have rights—notably free, prior and informed consent—the Innu chiefs wanted to inform Rio Tinto shareholders that they can shed light on the negligence of IOC in Canada.

The Innu chiefs sought to inform Rio Tinto shareholders that there is specific legal precedent in Canada, where a recent Supreme Court ruling recognized the existence of First Nations ancestral title and stated that Aboriginal peoples holding this title, including the Innu of Quebec, “have the right to the benefits associated with the land—to use it, enjoy it and profit from its economic development” (excerpt from the ruling).

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UPDATE 1-Apart from Big 3, iron ore miners face ‘existential’ threat – Goldman – by Manolo Serapio Jr (Reuters U.S. – April 16, 2015)

http://www.reuters.com/

SINGAPORE, April 16 (Reuters) – Up to half of iron ore output by miners outside the three mega producers in Australia and Brazil is at risk of closure with global demand set to peak at about 1.4 billion tonnes next year, Goldman Sachs said.

Production volumes among top miners – Vale, Rio Tinto and BHP Billiton – was not at risk, the bank said. “However, the rest of the industry is now facing an existential challenge,” Goldman analysts Christian Lelong and Amber Cai said in a report.

“We expect seaborne iron ore demand to peak in 2016 as the displacement of marginal Chinese iron ore production fails to offset a contraction in domestic steel consumption,” they said.

Separately, Moody’s Investors Service said supply reductions were dwarfed by planned increases estimated to exceed 300 million tonnes over the next several years.

Goldman cut its 2015 iron ore price estimate by 18 percent to $52 a tonne. It forecast $44 in 2016 and $40 in 2017 and 2018, down 29-33 percent from previous estimates. The price could drop to $40 this year and next, based on Moody’s estimates.

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Citi analysts call the ‘end of the Iron Age’ – by Matt Clinch (CNBC.com – April 13, 2015)

http://www.cnbc.com/

Oversupply and a lack of demand growth has led some market analysts to speculate that iron ore prices will never recover to former levels, and warn of a divergence in different base metals going forward.

The price of iron ore is now just over $47 a ton, according to The Steel Index (TSI), which measures a benchmark of 62-percent ore. This is its lowest level since the TSI started compiling spot market prices in 2008, according to Reuters.

On Monday, analysts at Citi slashed their forecasts for the price of the metal and now expect iron ore to average $45 a ton in 2015 and $40 a ton in 2016. These are downgrades of 23 percent and 36.6 percent, respectively.

“We believe the upside in the sector is now capped, however the downside is being protected by dividend yield. We think it is going to be a tough 1-2 years for the mining sector until we clear surplus capacity in the bulk commodity prices,” Heath Jansen, metals and mining analyst at Citi, said in a note Monday morning.

Another analyst, Colin Hamilton, head of global commodities research at Macquarie, explained that iron prices needed to fall in lower in the short term to clear an oversupply that isn’t prevalent in other commodity markets.

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Analysis: Booming economy can’t help iron ore, steel – by John Myers (Duluth News Tribune – April 5, 2015)

http://www.duluthnewstribune.com/

When Minnesota Lt. Gov. Tina Smith met with some of the hundreds of Iron Range Steelworkers who received layoff notices last week, she said the stress was evident on their faces.

“The older ones, who have been through this cycle before, really had this look of fatigue, like ‘here we go again,’ ” Smith told the News Tribune. “With some of the younger ones, there was more fear. We’re telling them we’re going to bring everything we can to help them. But mostly there’s just so much uncertainty. No one knows how long this is going to last.”

Those in attendance were among nearly 1,200 taconite industry workers who will be out of a job by June. Minnesota’s Iron Range and its mining industry are facing the most layoffs they’ve seen since 2009 thanks to an industry-crippling international trade problem that seems to be getting worse.

The prices of both finished steel and its main raw material, iron ore, are in a free fall thanks to a huge global oversupply. Similar Iron Range downturns in the early 1980s, in 2000-01 and again in 2009 all came as part of national and even global recessions.

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Nunavut regulatory org says no to Baffinland – by Lisa Gregoire (Nunatsiaq News – April 9, 2015)

http://www.nunatsiaqonline.ca/

Expanded shipping, and ice-breaking, contravenes land use plan: NPC

The Nunavut Planning Commission has chosen to protect Arctic ice — and all it delivers and represents to the people and animals of Nunavut — over industrial development.

In a bold move announced April 8 that will impact how Baffinland Iron Mines Corp. operates its Mary River iron mine in north Baffin, NPC directors have decided unanimously that the mining company’s amended project proposal does not conform to the North Baffin Regional Land Use Plan (NBRLUP).

This is the first time the NPC has ever issued a non-conformity decision. “Ice is an essential part of life in the North. For people, for polar bears, for seals and other animals in the North, ice is a bridge — both metaphorically to the past and present Inuit values and activities, also actually as a fact,” their decision states.

“Ice physically links Inuit to their culture and values.” While commissioners also recognize the need to balance “other modern economic values and development,” it nonetheless decided that Baffinland’s new plan, to break ice and ship ore from Milne Inlet nearly year-round, is incompatible with land use regulations.

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Labrador West dealt another blow as IOC announces 150 layoffs (CBC News Newfoundland – April 09, 2015)

http://www.cbc.ca/news/canada/newfoundland-labrador

Labrador West has been dealt another significant economic blow, with 150 layoff notices going out Thursday to unionized workers with the Iron Ore Company of Canada.

The workers are members of Local 5795 of the United Steelworkers, which represents some 1,400 people at the operation, said president Ron Thomas.

The layoffs come amid a significant drop in commodity prices, and many were expecting cost-cutting measures from the mining giant. IOC is majority owned by Rio Tinto, and employs roughly 2,500 people in Labrador West and Sept-Îles, Que. Labrador City Mayor Karen Oldford said it was a “sad day” for the community, but the number was roughly what the town expected if there were going to be layoffs.

“All we can do is try to work with the families that are going to be affected and hope that the commodity prices will turn around quickly, just as quickly as they went down, in order to try to get people back to work,” she said.

Earlier efforts by the company to cut costs at Labrador City failed, with the union overwhelmingly rejecting a proposed wage freeze in February. There was also very little participation in early retirement incentives.

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Iron ore in fresh crisis as forward prices crumble – by Henning Gloystein and Manolo Serapio Jr. (Reuters India – April 10, 2015)

http://in.reuters.com/

SINGAPORE – (Reuters) – Iron ore is veering to a new crisis as prices for future delivery of the commodity slide 30 percent in the space of a month, and its outlook is now more bearish than oil and more dire than ever for miners struggling to just stay in business.

Prices of the steel-making ingredient for immediate delivery have slumped 60 percent over the past year as demand particularly from China slowed rapidly.

Despite the crumbling cash market, miners had been able to hedge future production at prices well above spot levels. Indeed, a month ago, miners could still sell 2017 output at close to $70 a tonne even as April 2015 prices fell below $60 for the first time in more than five years.

Forward iron ore prices have since tumbled below $47 for deliveries all the way until the end of 2017, depriving nearly all miners of any chance of establishing hedges at or above breakeven levels during that period.

A combination of factors brought about the recent capitulation in forward prices, most notably news that China plans to subsidise its iron ore sector to protect its flagging steel industry. Subsidies would help keep mines open and keep supplies flowing.

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Australia’s Hockey vs Glencore’s Glasenberg – by Kip Keen (Mineweb.com – April 9, 2015)

http://www.mineweb.com/

Treasurer’s tough comments on Glencore-Rio Tinto merger could be read as a stern warning by Australia’s government.

Taken at face value Australia’s treasurer Joe Hockey has declared Rio Tinto untouchable. As widely reported now by media, Hockey is quoted as saying by numerous sources at a recent meeting including mining executives that there was “no way” he’d let Glencore merge with Rio Tinto “on his watch”. Assuming the reports are accurate, the question becomes, is Hockey serious?

If he is, then Australia truly has a curious way of dealing with possible foreign takeovers. Yes, it’s ultimately up to the treasurer (a political position equivalent to finance minister in other parliaments) to decide on big deals like this where the “national interest”, e.g. major tax revenue, is at stake.

But then the decision is usually taken as part of, or at least after, some due diligence. Australia’s Foreign Investment Review Board (FIRB) usually makes unbinding recommendations on such deals to the treasurer. Then the treasurer decides, however he/she and his/her government want.

Now, if Hockey truly means “no way” on another (hypothetical) attempt by Glencore to merge with Rio Tinto, he would effectively be turning the whole process on its head.

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Gina Rinehart’s Roy Hill mine not relying on China – by David Stringer (Sydney Morning Herald – April 9, 2015)

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

Asia-Pacific’s richest woman is gearing up to start shipments from her $10 billion iron ore project in Australia. Even with prices at 10-year lows, she’s displaying no lack of confidence in the mine’s success.

Billionaire Gina Rinehart’s ace? Her mine isn’t relying solely on sales to China, the biggest iron ore buyer. This limits the project’s exposure to a market where steel demand is judged to be peaking. Instead, she’s locked in supply contracts with three of the largest iron ore consuming Asian nations outside of China.

“They feel very confident. Roy Hill has a massive advantage in that it has diversified its markets,” Philip Kirchlechner, Perth-based director of Iron Ore Research Pty. said by phone. “They have buyers from three of the other major iron ore importing markets.”

Roy Hill, Australia’s largest single iron ore mine, is on track to commence exports from September, adding 55 million tons a year of output to a market already saturated by a growing surplus. It’s even accelerating the mine’s schedule, seeking to hit its planned capacity at the fastest pace of any project built in Western Australia’s iron-rich Pilbara region.

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Cliffs to put mines, rails, ports up for sale in Quebec, N.L. (CBC News Business – April 7, 2015)

http://www.cbc.ca/news/business

Mine company under bankruptcy court protection as it completes its exit from Eastern Canada

The Canadian Press – Idled Quebec iron ore mines, railways and port facilities, are about to be put up for sale as part of a court-supervised exit from eastern Canada by Cliffs Natural Resources.

The Cleveland-based mining company’s subsidiaries, which filed for creditor protection in January, are seeking a Quebec court’s permission to solicit interest next month in the Bloom Lake mine, the Wabush Mine, and related port and rail assets in Quebec and Labrador, according to a motion filed by monitor FTI Consulting Canada.

Bloom Lake General Partner Ltd. and affiliates such as Cliffs Quebec Iron Mining filed for protection under the Companies’ Creditors Arrangement Act amid falling iron ore prices.

Excluded from the sale process are Cliffs’ chromite assets in Ontario’s Ring of Fire that are in the process of being sold to Noront Resources for $20 million US.

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