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Iron Ore

The end battle? Big iron ore miners tighten grip on market – by Manolo Serapio Jr. and Ruby Lian (Reuters India – February 12, 2015)

http://in.reuters.com/

SINGAPORE/SHANGHAI – (Reuters) – The world’s big three iron ore miners appear to be entering the final phase of a fight to increase market share in China as massive expansions drive more high-cost rivals out of business.

The global giants have met stubborn resistance after many big Chinese miners kept producing despite weaker iron ore prices, helping push prices far lower than Rio Tinto, BHP Billiton and Vale envisaged when they began to flood the world with ore two years ago.

However, cracks are starting to appear in even China’s resilient state-mining sector, where mines can have production costs 20-50 percent above the market but also employ thousands of workers and are aligned with big steel makers.

One mine in Beijing that produces about 2 million tonnes of iron ore concentrate a year plans to suspend production for one-and-a-half months from this month, the first state-owned mine to do so, industry sources said.

Further price falls would bring more mine closures, said analyst Zhao Chaoyue, with China Merchant Futures in Guangzhou. “That includes some state-owned mines owned by steel mills, which are likely to give up their own iron ore output and turn to cheap imported ore too,” Zhao said.

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Mining magnate Rinehart takes court action against TV series – by Jamie Smyth (Financial Times – February 13, 2015)

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

Sydney – Gina Rinehart, Australia’s richest person, has taken a television channel to court in an apparent attempt to block the broadcast of a hit miniseries detailing her colourful family and business history.

Lawyers for Mrs Rinehart told the New South Wales Supreme Court on Friday that the House of Hancock series was potentially defamatory, malicious and full of inaccuracies.

They applied to the court to force Channel Nine to hand over a copy of the second and final instalment of the show, which is due to be broadcast on Sunday, to see if there are grounds to seek an injunction to stop it airing.

Judge Peter Garling granted the application, saying that based on promotional material and interviews there was a prospect the show would air statements that are not entirely accurate or perhaps even falsified.

“I am satisfied the plaintiff is entitled to see it,” he said. The billionaire is now able to view the show before deciding whether to seek an injunction on Saturday.

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Rio Tinto to defy mining pain with big payout while rivals suffer – by Sonali Paul and Silvia Antonioli (Reuters U.S. – February 10, 2015)

http://www.reuters.com/

MELBOURNE/LONDON – (Reuters) – Rio Tinto is expected to star among the top five global miners with a return of billions of dollars to shareholders at its annual results, even as the firm is set to report its worst half-year profit since 2009.

It will likely be all downhill for investors in the megaminers after Rio Tinto reports on Feb. 12 as they are all tipped to report sharp slides in earnings, gutted by weaker prices for almost everything they produce.

Iron ore will be the biggest source of pain, even though it remains the most lucrative product for Brazil’s Vale, Rio Tinto and BHP Billiton, and investors’ main concern is how the big miners are going to shore up cash flow. The top three producers have wounded the industry by flooding the market with new supply, knocking iron ore prices down nearly 50 percent in 2014, a steeper slide than anyone anticipated.

While boosting output, Rio has bolstered its cash flows by slashing costs, cutting capital spending and reducing debt, putting it in the best position to return cash to shareholders. BHP took the same steps, but has been whacked by plunging oil prices.

“In our opinion Rio has significantly greater flexibility (than BHP) at this point in time to pursue short-term capital management initiatives,” said Ben Lyons, a portfolio manager at ATI Asset Management.

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Gina Rinehart’s Roy Hill mine is set for nasty losses – by Robert Gottliebsen (The Australian – February 9, 2015)

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

IF THE current iron ore price decline continues into 2017 and beyond, then Gina Rinehart’s massive $10 billion Roy Hill mine project is set for very large losses when it starts production next year.

And if the reports of safety problems in the construction phase are right, then the capital costs will blow out beyond $10bn, especially if unions start playing hard ball, as they often do when there is a safety cause.

Accordingly, it makes perfect sense for Gina Rinehart to sell her Fairfax shares because additional funding will almost certainly be needed. The fact that she is unhappy with Fairfax management and can exit at a small profit makes the sale even more sensible. It’s an investment that was made when the iron ore price was booming.

The royalties the family receives from Rio Tinto iron ore production provide an underlying base of additional funding which means that the Hancock empire is not about to fall over. Nevertheless, the Hancock empire is set for a nasty experience.

If the mine, rail and ports are constructed on budget, the hi-tech facility is expected to have operating costs that would enable it to be profitable on a cash basis even if the iron ore price stays at existing levels.

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South Korea’s POSCO faces another setback in India – by Krishna N. Das and Jatindra Dash (Reuters India – February 5, 2015)

http://in.reuters.com/

(Reuters) – South Korea’s POSCO (005490.KS) will have to bid for an iron ore licence to feed its planned $12 billion steel plant in India, a minister said, in a setback for the company that was expecting the government to allocate it a mine without any competition.

The project to be set up by the world’s sixth-largest steelmaker has been caught up in a regulatory maze for the past decade, but the company had waited in the hope of getting preferential access to iron ore in Odisha.

But steel and mines minister Narendra Singh Tomar on Thursday ruled out an exception to an executive order mandating auctions for all new mines. This will mean POSCO’s costs will likely rise if it does manage to win a mine.

“Even I’ll have to bid for a mine if I want one,” Tomar said, as the government looks to overhaul the past practice of handing over mines and reduce chances of corruption. The government’s decision, however, goes against the recommendation of Odisha to grant POSCO a mine without an auction.

“It was an international commitment and we had recommended on the basis of the request made by the (previous) central government,” Odisha’s steel and mines minister Prafulla Kumar Mallik told Reuters. “If POSCO will have to bid, it will be a setback for the project.”

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Currency conspiracy theory wide of the mark with iron ore – by Clyde Russell (Reuters U.S. – February 5, 2015)

http://www.reuters.com/

LAUNCESTON – Some people love conspiracy theories and the latest is that the Australian central bank is deliberately weakening its currency to save the country’s big iron ore miners.

That’s the opinion of Lourenco Goncalves, chief executive of U.S.-based iron ore and coal miner Cliffs Natural Resources but, like virtually all such theories, it fails the test of logic and credibility.

Goncalves argues that the Reserve Bank of Australia (RBA) has manipulated its currency to help his much bigger rivals, the Anglo-Australian pair of Rio Tinto and BHP Billiton.

In comments made on Tuesday, the same day Australia’s benchmark rate was cut by 25 basis points to a historical low of 2.25 percent, the outspoken CEO said the RBA was “taking no prisoners” with the Australian dollar.

“They want to help BHP, they want to help Rio Tinto, they want to help that lady over there, Gina whatever,” Goncalves said, a reference to Australia’s richest person, Gina Rinehart, whose company is due to start up the 55 million tonne a year Roy Hill mine in Western Australia later this year.

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House prices dive, food bank use is up as latest mining bust hits Labrador town – by Sue Bailey (Canadian Press/Brandon Sun – February 4, 2015)

http://www.brandonsun.com/

ST. JOHN’S, N.L. – Jason Penney knows the highs and lows of a miner’s life in Wabush, N.L., a one-industry town where the price of iron ore is discussed like the weather. But he says the community of 1,900 has reeled since its main employer shut down last year.

“We’ve never seen it quite this bad,” the president of United Steelworkers Local 6285 said from the office he now occupies alone. An administrative assistant and a safety officer were both let go along with about 500 other workers who lost their jobs when the Wabush iron ore mine closed.

Cleveland-based Cliffs Natural Resources Inc. blamed high production costs and nose-diving commodity prices as demand from prime steel buyers, such as China, waned. The company also confirmed last month that it had stopped production at its Bloom Lake mine in Quebec, about a half-hour drive from Wabush.

Penney said the move affects another 500 workers who flew in and out. For Wabush and nearby Labrador City, which bills itself as the iron ore capital of Canada, it means a loss of crucial spinoff and service jobs.

It’s all adding up to one of the most resounding busts ever for the region, Penney said. “There’s been a lot of people in sad, tough times. It was a rough Christmas on a lot of families.

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China reaching “peak steel” isn’t all bad news – by Clyde Russell (Reuters U.S. – February 4, 2015)

http://www.reuters.com/

Feb 4 (Reuters) – A term gaining currency among China commodity watchers is “peak steel”, something that sounds ominous, especially to iron ore and metallurgical coal miners. The increasing market consensus is that China is at, or close to, reaching the maximum level of steel output and demand.

If this is the case, it means China’s steel consumption will peak at levels well below what many in the market had expected only a few short years ago. China produced a record 822.7 million tonnes of steel in 2014, roughly half of global output, according to data from the National Bureau of Statistics.

However, this was only 0.9 percent higher than the previous year, representing the slowest annual growth rate in 33 years. Even this modest increase in output was only achieved on the back of a surge in exports of steel products, which jumped 50.5 percent in 2014 to 79.35 million tonnes.

Apparent steel demand in China dropped 3.4 percent to 738 million tonnes, according to the China Iron and Steel Association (CISA).

These figures suggest that the “peak steel” proponents are probably on the right track, especially since a strong rebound in steel demand in 2015 is viewed as unlikely, given expectations of economic growth of around 7 percent and ongoing problems of oversupply in residential housing.

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U.S. mining giant Cliffs eliminates Bloom Lake exposure – by Bertrand Marotte (Globe and Mail – February 3, 2-15)

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.

Montreal – U.S. mining giant Cliffs Natural Resources Inc. has “ring-fenced” its Bloom Lake iron ore mine under bankruptcy protection and no longer has any exposure to closing or clean-up costs, senior executives say.

After talks with potential buyers of the Bloom Lake assets over the past two months, it was decided the best action to take was to put them under protection of the Companies’ Creditors Arrangement Act (CCAA), Cliffs chairman and chief executive officer Lourenco Goncalves said Tuesday.

That means Cliffs’ Bloom Lake liabilities now stand at zero, he said on a conference call for analysts. Bloom Lake – in northeastern Quebec – is “the cancer that we have to take out” as Cliffs retrenches to focus on its U.S. iron ore business, Mr. Goncalves said in a telephone interview Tuesday.

The company said in November that it was “pursuing exit options” for its Eastern Canada iron ore operations, estimating its maximum exposure to close the Bloom Lake site at between $650-million (U.S.) and $700-million.

“We were going through chemotherapy and that didn’t do it. Now the [cancerous] limb has been cut off,” Mr. Goncalves said in the interview.

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Cliffs highlights huge downsizing in 2014 – by John Myers (Duluth News Tribune – February 2, 2015)

http://www.duluthnewstribune.com/

Cliffs Natural Resources officially highlighted its massive 2014 sell-off on Monday, releasing the company’s fourth quarter and year-end results that show millions of dollars lost as it shuttered and sold large swathes of its holdings.

Cliffs recorded a net loss of $7.2 billion in 2014, or $47.29 per diluted share, thanks largely to selling U.S. coal mining operations at a loss and then declaring bankruptcy at its Bloom Lake Canadian iron ore operations.

Fourth-quarter 2014 consolidated revenues of $1.3 billion were down 15 percent from 2013. The company said the decline was driven by lower revenues from the Asia Pacific Iron Ore and Eastern Canadian Iron Ore segments hit hard by a 45 percent drop in the price of seaborne iron ore as a worldwide oversupply develops.

There was good news from the company’s U.S. iron ore operations, however, as the company moves toward becoming an all-U.S., all-iron ore business.

U.S. Iron Ore’s pellet sales volume in the fourth quarter of 2014 hit 7.8 million tons, a 26 percent increase when compared with 6.2 million tons sold in the fourth quarter of 2013.

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Iron ore family embroiled in will dispute – by Ben Hagemann (Australian Mining – February 3, 2015)

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

The daughter of late iron ore magnate Michael Wright has issued a wish list of bizarre and extravagant “needs” to increase her claim on his estate.

Michael Wright died in 2012 with an estimated worth of $2.7 billion (as reported by The West Australian; $1.5 according to The Australian), which was built thanks to mining royalties inherited from his father Peter Wright, who was a business partner with Lang Hancock.

Olivia Mead, 19, the youngest child fathered by Wright has lodged claim against the Wright estate that the $3 million trust fund (only to be accessed when she turns 30) was not adequate.

Wright’s other two daughters Leonie Baldock and Alexandra Burton have been directors of Wright Prospecting, which in 2013 won a legal dispute against Hancock Prospecting over a 25 per cent stake in the Rhodes Ridge iron ore deposit.

Mead said in the WA Supreme Court on Monday she did not have a close relationship with her father “overall”, but that she visited him at least once a week in 2012 prior to his death in April. She said Wright told her he wanted to leave property for her, but property was not bequeathed to her in the will.

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NEWS RELEASE: Cliffs Natural Resources Inc. Announces Decision on Bloom Lake Mine

 Commences Formal Canadian Restructuring Proceedings

CLEVELAND, Jan. 27, 2015 /PRNewswire/ — Cliffs Natural Resources Inc. (NYSE: CLF) announced today that Bloom Lake General Partner Limited and certain of its affiliates, including Cliffs Quebec Iron Mining ULC (collectively, “Bloom Lake Group”) commenced restructuring proceedings in Montreal, Quebec, under the Companies’ Creditors Arrangement Act (Canada) (“CCAA”). The Bloom Lake Group had recently suspended operations and for several months has been exploring options to sell certain of its Canadian assets, among other initiatives.

The decision to seek protection under the CCAA was based on a thorough legal and financial analysis of the options available to the Bloom Lake Group. The Bloom Lake Group is no longer generating any revenues and is not able to meet its obligations as they come due. The Initial CCAA Order will address the Bloom Lake Group’s immediate liquidity issues and permit the Bloom Lake Group to preserve and protect its assets for the benefit of all stakeholders while restructuring and sale options are explored.

As part of the CCAA process, the Court has appointed FTI Consulting Canada Inc. as the Monitor. The Monitor’s role in the CCAA process is to monitor the activities of the Bloom Lake Group and provide assistance to the Bloom Lake Group and its stakeholders in respect of the CCAA process.

Lourenco Goncalves , Chairman of the Board, President and Chief Executive Officer of Cliffs Natural Resources Inc. said, “For several months, we have been seeking equity investors and exploring sale options for Bloom Lake including working collaboratively with Investissement Québec. We support the decision by the directors of the Bloom Lake Group to conduct a restructuring process under the supervision of the Court.”

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Iron Ore Extends Rout as China Slows, Banks Reduce Forecasts – by Jasmine Ng (Bloomberg News – January 26, 2015)

http://www.bloomberg.com/

Iron ore retreated to the lowest level in more than five years as a slowdown in China hurt the outlook for demand in the world’s biggest user while the largest mining companies add to supply, boosting a surplus.

Ore with 62 percent content delivered to Qingdao, China, tumbled 4.3 percent to $63.54 a dry metric ton, according to data by Metal Bulletin Ltd. That’s the lowest price on record going back to May 2009, and was the biggest one-day fall since Nov. 18. The commodity is 11 percent lower this year.

The raw material has been in a bear market since March after Rio Tinto Group (RIO), BHP Billiton Ltd. and Vale SA spent billions of dollars to boost low-cost output even as China slowed. Goldman Sachs Group Inc. joined global banks on Friday in cutting price forecasts for 2015, predicting a return to a bull market is probably more than a decade away. The love affair between China and iron ore is cooling, the bank said.

The decline in prices is mainly due to “slower demand growth for steel in China, together with the expected new iron ore supply,” Vanessa Lau, a Hong Kong-based analyst at Sanford C. Bernstein Ltd., said before the figure was released. Steel mills in China are also cutting output before the Lunar New Year, putting further pressure on prices, she said, referring to the national holiday next month when industrial activity slows.

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Goldman Joins Banks Cutting Iron Ore Outlook on Global Glut – by Jasmine Ng (Bloomberg News – January 23, 2015)

http://www.bloomberg.com/

First Citigroup Inc., then UBS Group AG, now Goldman Sachs Group Inc. For iron ore, which plummeted 47 percent in 2014, the cuts to price forecasts from global banks just keep coming in the opening weeks of the year.

The steel-making ingredient may average $66 a metric ton this year from an earlier estimate of $80, Goldman Sachs said in a report dated Jan. 23. This is the first time the New York-based bank has reduced its 2015 prediction since March 2013, and it’s at least the fifth bank this month to lower estimates, citing rising seaborne supplies and weaker demand growth from China, the biggest user.

The iron-ore surplus emerged last year after the largest miners including Rio Tinto Group (RIO), BHP Billiton Ltd. and Vale SA (VALE5) invested billions of dollars to boost output and as China grew at the slowest pace in more than two decades. Cheaper energy costs and depreciating currencies may delay supply cuts needed to rebalance the market, causing prices to extend losses, said Citigroup and UBS, which pared estimates for the commodity by as much as 22 percent.

“Significant overinvestment to date will ensure that the market is well supplied, while demand from the Chinese steel sector is maturing,” Goldman analysts including Christian Lelong wrote in the report. “A painful war of attrition awaits” the iron ore industry as less competitive mines shut, the analysts said.

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Iron Ore goes bust in Labrador West, once booming in production – by Terry Roberts (CBC The Current – January 23, 2015)

http://www.cbc.ca/thecurrent/ Click here for program but note advertisements for other news segments: http://podcast.cbc.ca/mp3/podcasts/current_20150123_79604.mp3 The fall in demand for Iron Ore is turning life upside down in the part of Labrador they once called “Mini Fort Mac”. Today we head to Labrador West, Canada’s capital of Iron Ore, where they know a thing or two about …

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