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Iron Ore

COLUMN-BHP, Rio production show scale of commodity price challenge – by Clyde Russell (Reuters India – January 21, 2015)

http://in.reuters.com/

LAUNCESTON, Australia, Jan 21 (Reuters) – The latest production reports from mining giants BHP Billiton and Rio Tinto hammer home an uncomfortable truth: No matter how much output increases and costs are cut, falling commodity prices triumph.

Both BHP and Rio Tinto released reports this week that met market expectations and re-affirmed production guidance for the world’s top two mining companies.

While it’s no doubt positive for the Anglo-Australian miners that they are successfully executing plans to boost output while containing costs, the numbers make for some sobering reading.

Rio Tinto, the world’s second-largest iron ore producer after Brazil’s Vale, said it expected to mine 330 million tonnes of the steel-making ingredient at its Western Australia mines in 2015 on a 100 percent basis, up from 280.6 million tonnes last year. (www.riotinto.com)

The average price achieved in 2014 was $84.30 a tonne, Rio Tinto said, which would yield revenue of about $23.65 billion, on a 100 percent basis from the Pilbarra region. Rio Tinto’s actual share of that would be about $18.95 billion, as some of its mined output accrues to partners.

And given the structural oversupply in the market and muted demand growth from top importer China, it seems unlikely that the price will rally significantly in 2015.

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Australian mining boom subsides with China’s economy – by Don Lee (Los Angeles Times/Duluth News Tribune – January 17, 2015)

http://www.duluthnewstribune.com/

KARRATHA, Australia — Joe Norton, a large man with a sunburned face, digs into a plate full of beef, potatoes, carrots and Brussels sprouts at Searipple, a mobile-home camp in Australia’s western frontier.

It isn’t the tastiest food in the world, the 54-year-old says, but it’s free, provided by his employer, iron mining giant Rio Tinto.

So is most everything else in his life: all of his meals, a manufactured house with microwave and flat-screen TV, a round-trip ticket every Friday to fly home, and not the least, his $180,000 salary.

Not bad for a man with an eighth-grade education doing semi-skilled work on railways transporting iron ore.

Yet the gig probably won’t last a lot longer, Norton reckons. Some of his fellow miners already have been sent packing as the company downsizes its contracted workforce. “They’re cleaning the fat,” he said.

With China’s slowing economic growth, one of the biggest mining booms in Australian history is over, leaving behind a trail of jobless workers and struggling local businesses in places such as Karratha, which thrived in recent years but now is at risk of becoming a ghost town.

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COLUMN-Big iron ore miners supply strategy working partially – by Clyde Russell (Reuters U.S. – January 13, 2015)

http://www.reuters.com/

LAUNCESTON, Australia, Jan 14 (Reuters) – China’s record imports of iron ore in December capped a year of strong growth, while also proving that the strategy of the big miners is at least partially working.

China brought in 86.85 million tonnes of the steel-making ingredient in December, bringing the total for 2014 to 932.5 million tonnes, a gain of 13.8 percent over the previous year.

The jump in iron ore imports isn’t because China is producing more steel, with output of crude steel rising a mere 1.9 percent in the first 11 months of 2014 over the same period in 2013, according to official figures.

It’s also not because huge stocks of iron ore are being built up in warehouses, with inventories monitored by the Shanghai Futures Exchange SH-TOT-IRONINV dropping to 99.85 million tonnes in the week to Jan. 9, the lowest in 11 months.

The most logical explanation is that the 47-percent decline in the Asian spot iron price in 2014 .IO62-CNI=SI is displacing some high-cost Chinese domestic output.

This has been the strategy of the big three iron ore miners, Brazil’s Vale and the Anglo-Australian pair of Rio Tinto and BHP Billiton.

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Cliffs CEO warns Iron Range lawmakers over aid deal for Essar Steel – by John Myers (Duluth News Tribune – January 12, 2015)

http://www.duluthnewstribune.com/

The head of Cliffs Natural Resources met with Iron Range state lawmakers Monday evening in St. Paul, warning the state’s ongoing help for Essar Steel may impact his company’s operations in Minnesota.

In his first ever meeting with the Range delegation, Cliffs CEO Lourenco Goncalves told lawmakers that Essar’s entry into the U.S. taconite iron ore market may upset what has been a well-balanced supply-and-demand chain.

“It was a very friendly meeting. Not confrontational at all. But he made it clear that giving Essar Steel any additional state subsidy may have a detrimental impact on Cliffs down the road,’’ state Rep. Carly Melin, DFL-Hibbing, told the News Tribune.

Goncalves has headed the Cleveland-based company since August, after Cliffs’ previous management team was ousted in a hostile takeover by the New York hedge fund Casablanca Capital.

Cliffs says Essar will become a direct competitor for its taconite iron ore operations – including NorthShore Mining, United Taconite and Hibbing Taconite in Minnesota. Cliffs has some 1,850 employees at the three Minnesota plants, with a payroll of over $250 million annually.

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This Week in Range History: THE MESABI IRON COMPANY: TACONITE PIONEER – by Donald C. Wright (Home Town Focus – January 9, 2015)

 http://www.hometownfocus.us/ Northern Minnesota

This week we’re sharing a story written by Eveleth native Donald C. Wright about the Mesabi Iron Company, predecessor to Reserve Mining Company in Babbitt. Although the Mesabi Iron Company operated the plant in Babbitt for only two years (1922 – 1924), they were taconite pioneers who “proved that high grade iron ore could be produced for America’s steel industry from hard, tough Minnesota taconite.”

Wright’s story was originally published in the June 1984 edition of Range History: The Mesabi Perspective, a quarterly publication of the Iron Range Historical Society, and is reprinted here with their permission. All of the photos published with the story here are also courtesy of the Iron Range Historical Society.

Thank you Iron Range Historical Society for sharing your stories of our history. Cindy Kujala HTF Staff Writer

About the time the American Civil War was coming to a close in Wilmer McLean’s parlor in Appomattox, Virginia, Michigan’s bright copper boom was fading and miners began to cast interested glances at the new state of Minnesota. Minnesota’s North Shore had been opened to settlement by terms of the Treaty of LaPointe with the Chippewa in 1855 and prospectors already were drifting in to investigate rumors of gold, silver and copper.

One of the new arrivals was a German immigrant named Christian Wieland who, with his four brothers, hacked out a settlement on the shore of Lake Superior and called it Beaver Bay.

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Iron ore bounce likely to be shortlived – by Neil Hume (Financial Times – January 6, 2015)

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

Few in the iron ore industry will remember 2014 with any fondness. The steelmaking ingredient was the worst performing major commodity, plummeting 50 per cent as a flood of new supply hit the market and swamped demand.

But it has started 2015 on the front foot with benchmark Australian ore advancing almost 8 per cent since Christmas. The question for the industry is whether this is a dead cat bounce or the start of a recovery in prices, which recently hit a five-and-a-half-year low of $65.60 a tonne.

So far few are convinced the rally will last. Analysts believe the bounce in prices is being driven by restocking at steel mills ahead of the Chinese new year and changes to reserve requirements for Chinese banks. With more supply set to come on line and demand in China weak, many believe prices will come under further pressure this year, even trading into the $50s.

This would be bad news for big mining houses such as BHP Billiton, Rio Tinto and Vale, which have spent billions of dollars expanding operations and generate most of their profits from iron ore.

“We view the upward correction as a similar experience to that recently encountered while climbing Skiddaw (the fourth highest mountain in England) . . . in a gale,” said analysts at Investec Securities in a report.

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Investissement Québec in talks to reopen Cliffs Natural Resources mine in Bloom Lake – by Frederic Tomesco and Liezel Hill (Bloomberg News/Montreal Gazette – January 8, 2015)

http://montrealgazette.com/

Quebec is talking to U.S. miner Cliffs Natural Resources Inc. about restarting the Bloom Lake iron-ore mine in the northeast of the province.

It’s too early to provide more details on the discussions or speculate on potential outcomes, Quebec Energy and Natural Resources Minister Pierre Arcand said in an interview yesterday.

Investissement Québec, an investment arm of the provincial government, is talking to the Cleveland-based company “about the next step,” he said. “We’ll look for the best way to relaunch this facility.”

Cliffs announced Jan. 2 it had ended production at Bloom Lake, less than two months after the company said it was considering the closing of the project. Cliffs acquired the mine in 2011 via its C$4.2 billion ($3.6 billion) takeover of Consolidated Thompson Iron Mines Ltd.

Cliffs is exiting higher-cost operations to focus on its domestic business after iron-ore prices slumped to a five-year low amid weakening demand for the steelmaking ingredient in China, the biggest consumer. A Cliffs spokeswoman didn’t immediately respond to requests for comment.

Quebec Finance Minister Carlos Leitao said in June that his government would revive the so-called Plan Nord, a strategy to tap mining and energy resources north of the 49th parallel that the previous administration halted in 2012.

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NEWS RELEASE: New court victory for the Innu against Rio Tinto (IOC): Quebec Court of Appeal authorizes $900M lawsuit

New court victory for the Innu against Rio Tinto (IOC): Quebec Court of Appeal authorizes $900M lawsuit

UASHAT MAK MANI-UTENAM, QC, Jan. 7, 2015 /CNW Telbec/ – The Innu First Nations of Uashat Mak Mani-Utenam and Matimekush-Lac John, whose traditional territory (Nitassinan) covers a large part of North-eastern Quebec and Labrador, celebrated on January 6, 2015 a new legal victory in their 900 million dollar lawsuit targeting the Iron Ore Company of Canada (majority owned as well as operated by the mining giant Rio Tinto).

Rio Tinto (IOC) was seeking to have the case dismissed before trial by arguing that the Innu should have sued the government rather than the company. On September 19, 2014, the Rio Tinto (IOC) motion to dismiss the lawsuit was rejected at first instance by the Quebec Superior Court and the Court of Appeal has now refused to hear an appeal of the judgment by Rio Tinto (IOC).

“Rio Tinto and its subsidiary IOC continue to try to ignore us, just as they always have. IOC’s president even refuses to meet with us personally. But after this judgement, Rio Tinto (IOC) will no longer be able to hide. The highest Court in Quebec has made clear that Rio Tinto’s subsidiary IOC will have to answer in Court for its violations of our constitutionally protected rights, which violations date back to the 1950s”, declared the Chief of Uashat Mak Mani-Utenam, Mike McKenzie.

Despite their 900 million dollar lawsuit and the injunction they are seeking to put an end to the “IOC megaproject”, the Innu have tried time and again to achieve an honourable outcome with Rio Tinto by way of negotiation.

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Iron Ore Kicks Off 2015 With Rally on China Stimulus Speculation – by Jasmine Ng (Bloomberg News – January 2, 2015)

http://www.bloomberg.com/

Iron ore plummeted last year as surging global supplies topped demand. It opened 2015 by posting the biggest weekly gain in 18 months amid speculation that China will take more steps to spur growth in the world’s largest user.

Ore with 62 percent content delivered to Qingdao, China, was unchanged today at $71.26 a dry metric ton, following gains in the previous five trading sessions, according to data from Metal Bulletin Ltd. That took this week’s advance to 5.8 percent, the most since the period to July 5, 2013.

The steel-making ingredient tumbled 47 percent in 2014 as BHP Billiton Ltd. (BHP) and Rio Tinto Group expanded low-cost supplies, pushing the market into a surplus just as growth in China slowed. Data from Asia’s largest economy released on Jan. 1 showed that the government’s Purchasing Managers’ Index (CPMINDX) retreated in December to the lowest level in 18 months, adding pressure on policy makers to do more to bolster growth this year. The country buys two-thirds of global seaborne iron ore supply.

“There’s potential for the Chinese economy to be stimulated sometime soon” given the weaker PMI data, James Wilson, a Perth-based analyst at Morgans Financial Ltd., said by phone. “That may lead to more demand for steel products and iron ore. The December-January period is when the Chinese restock traditionally, so there’s some demand from there.”

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NEWS RELEASE: Cliffs Natural Resources Inc. Concludes the Sale of Logan County Coal and Provides Update on Bloom Lake

CLEVELAND, Jan. 2, 2015 /PRNewswire/ — Cliffs Natural Resources Inc. (NYSE: CLF) is pleased to announce that it has completed the sale of its Logan County Coal assets in West Virginia to Coronado Coal II LLC, an affiliate of Coronado Coal LLC, for $174 million in cash and the assumption of certain liabilities. The expected tax benefit associated with the transaction will be between 20% to 25% of the previously disclosed pre-tax loss of approximately $400 million, which represents an additional benefit of $80 million to $100 million in future cash tax savings. Cliffs will record the results of this sale in its fourth quarter earnings.

Separately, Cliffs confirms that active production at Bloom Lake has completely ceased and the exit from Eastern Canada continued to be executed on schedule as previously announced. The mine has transitioned to care and maintenance status and, consequently, at this time only a small number of employees involved in such activities are still in the payroll. The last shipment of iron ore out of the Port of Sept-Iles will be completed in early January 2015.

Lourenco Goncalves , Cliffs’ Chairman, President and Chief Executive Officer said, “The execution of the strategic initiatives outlined during our Q3 Conference Call in October 2014 continued to progress as planned during the last two months. The sale of Logan County Coal, which included a meaningful tax benefit to the Company, clearly demonstrates our ability to execute complex transactions despite an adverse M&A environment for commodity related transactions. Additionally, as we approach the final steps of our exit from Eastern Canada, we have brought to an end the flawed expansion that has cost Cliffs and its shareholders billions of dollars.”

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Cliffs’ Bloom Lake mine hit with record $7.5-million environmental fine – by Bertrand Marotte (Globe and Mail – December 26, 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.

Cliffs Natural Resources Inc. is feeling more pain from its foray into Canada.

As the Cleveland-based company pulls up stakes at its money-losing Bloom Lake iron ore mine in northeastern Quebec after investing billions in what its chief executive dubbed a “disaster,” the company’s subsidiary has been hit with a record $7.5-million fine for environmental infractions at the site.

Bloom Lake General Partner Ltd. – in which Cliffs has a controlling stake – pleaded guilty on Dec. 18 to 45 offences under the federal Fisheries Act and the Metal Mining Effluent Regulations in the Criminal and Penal Division of the Court of Quebec, according to Environment Canada.

The fine is the largest penalty for environmental infractions in the country’s history, Environment Canada said. Of the $7.5-million, $6.83-million will go to a federal fund that aims to direct money to environmental projects in the location where the incident took place.

Environment Canada said its investigation lasted more than three years. One major infraction involved the breach of a tailings pond dam that allowed more than 200,000 cubic meters of mine tailings and water to be released into fish-bearing waters.

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Bad year for Cliffs gives way to uncertain future – by John Myers (Duluth News Tribune – December 28, 2014)

http://www.duluthnewstribune.com/

A bad year is nearly in the rear-view mirror for Cliffs Natural Resources, but the view through the windshield doesn’t look great, either.

The Cleveland-based mining company with a huge presence on Minnesota’s Iron Range has seen its stock value evaporate in 2014, the price for its iron ore halved and Wall Street confidence in its ability to thrive reach rock bottom. How bad was 2014?

In the past 12 months:

  • Cliffs’ stock has fallen from $27 per share to about $6, and some analysts say it may go lower. That’s for a stock that hit $100 per share in 2011 and $75 as recently as 2012.
  • Cliffs’ management team was ousted in late July when the company became the victim of a hostile takeover by the New York hedge fund Casablanca Capital. Casablanca, which called Cliffs’ old guard an “incompetent and entrenched” board that had “destroyed shareholder value” by expanding too fast and ringing up debt at the expense of profit, said it would downsize the company and sell off many or all of its foreign holdings.
  • Cliffs permanently shuttered its Wabush iron ore mine and shipping facilities in Newfoundland and Labrador early in the year. Then in November it announced it was seeking “exit options” to shut down its Bloom Lake operations in Quebec if a buyer didn’t come forward. So far, no buyer has emerged, and the operations appear doomed, at least in the short run. Ironically, closing the plant will cost Cliffs millions more.

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Iron Ore Extends Drop to Five-Year Low as China Economy Weakens – by Jasmine Ng (Bloomberg News – December 22, 2014)

http://www.bloomberg.com/

Iron ore sank to the lowest level since 2009 as supply exceeds demand and China, the biggest user, contends with its weakest expansion in almost a quarter century.

Ore with 62 percent content delivered to Qingdao, China, retreated 1.8 percent to $67.90 a dry metric ton, data compiled by Metal Bulletin Ltd. showed. That’s the lowest since June 3, 2009, and extends this year’s slump to 50 percent.

The steel-making raw material is headed for the biggest annual loss in at least five years as BHP Billiton Ltd. (BHP), Rio Tinto Group and Vale SA (VALE5) expanded output, betting increased production will boost revenue and force less competitive mines worldwide to close. Gripped by a property downturn and excess capacity, China is set to grow 7.4 percent this year, the slowest full-year expansion since 1990. Australia cut its price estimate for next year by 33 percent as a surplus builds.

“The falling price this year has been far deeper than anyone anticipated,” Andrew Hodge, an analyst at Wood Mackenzie Ltd. in Sydney, said before today’s prices were released. “China has had weaker than expected demand from its own residential property sector. For the big three, they have the lowest cost operations so there’s no reason to stop producing,” he said, referring to BHP, Rio and Vale.

The market needs to absorb a surplus of about 110 million tons next year, almost double the 60 million tons in 2014, Goldman Sachs Group Inc. estimated in October. The bank forecasts a price of $80 next year.

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Israeli billionaire fails to silence critic over mine deal – by Henry Mance (Financial Times – December 21, 2014)

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

An Israeli diamond billionaire is facing defeat in an audacious attempt to use data protection laws to stifle one of his loudest critics.

Beny Steinmetz is engaged in a long-running legal battle with Global Witness, a campaign group that has raised “corruption concerns” about how BSG Resources, the mining arm of his family conglomerate, acquired rights to Africa’s largest iron ore project. Both Mr Steinmetz and BSG Resources deny wrongdoing in relation to the Simandou concession in Guinea.

Lawyers for Mr Steinmetz and three BSGR directors had tried to invoke the UK’s Data Protection Act to force Global Witness to reveal what data it held in relation to them and, if necessary, to destroy it. That move, which Global Witness said would compromise its confidential sources, was the first time privacy laws had been used in such a ­manner.

Last week, the Information Commissioner’s Office (ICO) rejected Mr Steinmetz’s request, saying Global Witness’s activities were exempt from data protection requirements because they were “for the purposes of journalism”. Global Witness says on its website that it campaigns “to stop elites getting away with looting entire states . . . and for an end to the exploitation of our environment”.

The case has been keenly watched by lawyers at news organisations, who foresaw a significant impact on investigative journalism had the lawsuit succeeded.

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Will Cliffs Natural Resources Inc (CLF) Go Bankrupt? – by Troy Kuhn (Bidnessetc.com – December 19, 2014)

http://www.bidnessetc.com/

Cliffs Naturals Resources Inc stock has plunged over the last year, and its weak balance sheet points to a grim future

Cliffs Natural Resources Inc (NYSE:CLF) has had a miserable year.

The company has lost around three-quarters of its market capitalization, and Credit Suisse recently downgraded the iron miner’s price target to $1. Cliffs stock has been targeted by investors and traders as a prime candidate for a short sell, as falling iron-ore prices continue to take a toll on the miner’s earnings.

Cliffs generates 83.7% of its revenue from iron-ore sales, and iron-ore assets represent 85.8% of its overall assets. Cliffs has been in trouble for a couple of years now.

Casablanca Capital LLC recently won a proxy fight against Cliffs, which forced several changes to the miner’s board. Cliffs’ CEO and chairman Lourenco Goncalves took over the company’s management after the proxy fight.

Casablanca was of the view Cliffs should sell off its Bloom Lake mine, along with its US coal operations and Australian mines. In August, Mr. Goncalves announced a share repurchase program of $200 million, and sold a minority holding in a graphite mining company.

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