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Iron Ore

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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Vale Loses Bid to Toss Rio Tinto Suit Over Guinea Mining – by Patricia Hurtado (Bloomberg News – December 17, 2014)

http://www.bloomberg.com/

Vale SA lost a bid to dismiss Rio Tinto Plc (RIO)’s suit alleging it conspired with Israeli billionaire Beny Steinmetz and his BSG Resources Ltd. to steal rights to the world’s biggest untapped iron-ore deposit by bribing officials in Guinea.

Rio Tinto accused Vale of passing confidential information it obtained during discussions the two companies had about Vale buying a stake in the Guinea property to Steinmetz and BSGR. Steinmetz, BSGR and Vale used that information to advance their own bid for the mining rights, Rio Tinto said in a complaint filed last year in federal court in New York.

U.S. District Judge Richard Berman in Manhattan today rejected Vale’s argument that the suit should have been brought in the U.K. because the two companies had agreed to take any dispute to an English court.

The judge cited “legitimate reasons” for keeping the case in the U.S., including Rio de Janeiro-based Vale’s alleged conduct in furtherance of the racketeering conspiracy, such as meetings between the company and London-based Rio Tinto that occurred in New York.

Berman also pointed to an existing federal investigation by Manhattan U.S. Attorney Preet Bharara relating to whether there was a scheme to siphon off Guinea’s mineral wealth.

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Oil, coal and iron ore at financial crisis levels – by Henning Gloystein (Reuters India – December 15, 2014)

http://in.reuters.com/

SINGAPORE – (Reuters) – Tumbling oil, coal and iron ore prices are now all at levels last seen during or before the financial crisis of 2008/2009, signalling not only the impact of a glut of supplies but deeper weakness in parts of the global economy, analysts say.

The raw materials are among the most sensitive to economic health, with oil and coal the world’s two most important energy sources and iron ore used to make steel.

Brent crude prices have almost halved since June to slightly above $60 a barrel, a level last seen in early 2009 during the financial crisis. In the coal market, the benchmark European futures contracts has dropped below $70 a tonne to levels comparable before the boom and bust of 2007-2009.

Iron ore prices have halved to under $69 a tonne as demand growth in the biggest market, China, wanes. Analysts initially pointed to rising oil and mining output, as well as energy efficiency and alternative sources such as renewables, as the main factors behind the drops.

But with no end to the price slide, it became apparent that a significant cooling of emerging economies as well as ongoing slack in developed markets such as Europe and Japan was also at play, especially after oil producer club OPEC said it would not cut output in support of prices.

“Softer global demand, coupled with unprecedented growth in supply are weighing on global oil indices, with prices falling to levels not seen since the Global Financial Crisis,” National Australia Bank said in a note on Monday.

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Iron ore won’t reach $US100 per tonne again, says BHP Billiton – by Philip Wen (The Age – December 12, 2014)

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

Shanghai: Mining giant BHP Billiton says iron ore prices are unlikely to eclipse $US100 a tonne again, with expectations of steel consumption growth in China slowing further next year.

“I’ve learnt never to say never and there’s always short-term variations, but I think that if you use basic economics … certainly $100 seems high,” BHP’s president of iron ore Jimmy Wilson told reporters in Shanghai on Thursday.

“It’s hard to see that significant bump [in demand] that we’ve seen coming from China happen again.” BHP’s senior management group, including chief executive Andrew Mackenzie, was in Shanghai to celebrate the shipping of its one billionth tonne of iron ore to China.

The first shipment departed from Port Hedland in 1973. “It took nearly 30 years for BHP Billiton to ship 100 million tonnes of iron ore to China and then only 12 more years to reach the one billion tonne milestone,” Mr Mackenzie said.

The milestone was testament to China’s extraordinary rate of development, he said. At current rates the next 1 billion tonnes milestone would take just five years to reach.

But though imports into China have surged, prices have nearly halved, dropping under $US70 a tonne for the first time in five years. The drop comes amid a supply glut brought on by aggressive expansion by major miners Rio Tinto, BHP and Vale – even as Chinese economic growth cools.

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Third rail line to Quebec’s north a necessity, says Schefferville – by Marika Wheeler (CBC News Montreal – December 11, 2014)

http://www.cbc.ca/news/canada/montreal

The head of Schefferville says experts have it wrong: there can’t be a Plan Nord without another train line

The administrator of Schefferville says despite what experts say, he believes the Plan Nord — Quebec’s plan for the development of the north — depends on having a third train line to get iron to market.

“If the government wants to have some sort of Plan Nord in the Fosse du Labrador, they have to have a third way to ship the iron to Sept-Îles,” said Paul Joncas.

Transportation represents about 40 percent of production costs for iron mines working in the Labrador Trough along the Quebec-Labrador border. Rail is the only way to transport the millions of tons of iron produced each year.

​There are currently two tracks that run north. One is owned by ArcelorMittal, and runs from Port-Cartier to Fermont. It only carries ore extracted by ArcelorMittal.

The second track runs from Sept-Îles to Schefferville and is owned, in part, by the Iron Ore Company (IOC). That means other companies working in the Schefferville area must pay a competitor to carry their product.

Experts warn waste of money

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Glencore boss slams iron ore sector (The Australian – December 11, 2014)

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

DOW JONES NEWSWIRES – The chief executive of mining giant Glencore, Ivan Glasenberg, again criticised the industry for its over-investment in certain commodities, telling investors that “fortunately we don’t produce iron ore.”

Mr Glasenberg’s apparent distaste for the key steelmaking ingredient comes despite Glencore’s approach earlier this year to Rio Tinto, one of the world’s largest iron ore producers, over a potential tie-up. The approach was rejected and under UK company rules Glencore can’t revive the talks until later next year.

Mr Glasenberg has criticised mining rivals such as Rio and BHP Billiton for continuing to invest in and ramp up iron ore production even though the commodity’s price slumped this year. Speaking at the company’s investor day, he said the reason prices had fallen was that “we’ve all invested too much, we’ve increased supply and unfortunately a big amount has gone in the iron ore market.”

The comments came as benchmark iron ore slid to $US68.90 a tonne overnight, just over 1% above its five-year low. Glencore said it would continue to take a disciplined approach to expanding its production capacity, amid the recent fall in commodity prices.

Mr Glasenberg said “capital misallocation, not a lack of demand, remains a key issue for the sector resulting in a clear need to differentiate by commodity.”

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Province’s hands tied over Wabush Mines – by Ty Dunham (St. John’s Telegram – December 09, 2014)

http://www.thetelegram.com/

Lack of dialogue between Cliff’s and MFC isn’t hopeful: Minister

The answer many have been waiting for may not become a reality, and Wabush Mines will likely be shut down for good. Talks between Cliff’s Natural Resources and MFC Industrial over the sale of Wabush Mines began in July, but the companies haven’t spoken together in weeks, and MFC hasn’t put anything in writing.

Cliff’s is stripping the mine away one piece at a time, honouring a multi-million dollar closure and rehabilitation plan with the financial assurances it can be carried out, according to the Mining Act.

It would cost millions for them to put the brakes on the closure while the MFC merely expresses interest, and Natural Resources Minister Derrick Dalley said the government is in no position to force a company to spend that kind of money.

“We don’t have authority as a government to stop a company from closing,” said Dalley in a recent interview with The Aurora. “For us to intervene, we would be highly concerned it may jeopardize the closure plan and financial assurance that have been provided.”

MFC has yet to provide a business plan, production plan, closure and rehabilitation plan or financial assurance, Dalley noted.

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‘Plan B’ puts Vale back in the driving seat – at a cost – by Samantha Pearson (Financial Times – December 2, 2014)

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

For Vale, the world’s largest producer of iron ore, its location in Brazil has always been both its greatest strength and its biggest challenge.

On the one hand, its proximity to high-grade iron ore mines such as Carajás in the north of the country has turned it into a world leader in the industry and Brazil’s most international company.

Between January and October this year, iron ore ranked as Brazil’s second-biggest export just behind soyabeans, accounting for about 12 per cent of total shipments in value terms.

However, on the other hand, with its biggest mines more than 10,000 miles away from the key Chinese market, its geographical position has been its Achilles heel in its battle with rivals BHP Billiton and the Rio Tinto Group, located in Australia, much closer to Asia.

While demand from China is slowing, the country still accounts for 49.6 per cent of Vale’s total iron ore sales and Asia as a whole represents 65.4 per cent, according to the company’s third-quarter results.

As such, finding ways to reduce the logistics costs of these vast delivery routes has always been one of Vale’s top priorities. As the global commodity supercycle ends, pushing down iron ore prices worldwide, these cuts have become even more important.

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Mining and corruption: Crying foul in Guinea (The Economist – December 6, 2014)

http://www.economist.com/

Africa’s largest iron-ore mining project has been bedevilled by dust-ups and delays

“AN emblematic tragedy” is how Sir Paul Collier, an adviser to the British government, describes the situation in Guinea—referring not to the Ebola outbreak (awful though he considers that to be) but the saga of Simandou, a mining project mired in allegations of corruption, expropriation and corporate espionage.

Simandou, a mountainous area in southern Guinea (pictured), has been called the El Dorado of iron ore. It is the world’s largest known untapped deposit of the stuff, with enough ore to sustain annual production of 200m tonnes—7% of global iron-ore output—for more than a quarter of a century. Better still, the ore there has unusually high iron content. The potential project cost for the mine, and the railway and port that would be needed to get ore on to ships, is $20 billion, making it Africa’s largest ever proposed mining venture.

Guinea could do with the investment: it ranks 179th out of 187 countries in the UN’s human-development index. Wags, alas, have taken to calling Simandou “Simandon’t”. Exploration rights were first granted in the 1990s, yet the earliest anyone expects production to begin is 2019.

The saga oozes intrigue. Among its cast of characters: two of the world’s biggest mining groups, the Anglo-Australian Rio Tinto and Vale of Brazil; Beny Steinmetz, an Israeli diamond tycoon; George Soros, a billionaire philanthropist; Mark Malloch-Brown, a former deputy head of the UN; the wife of Guinea’s former leader; and, possibly, members of South Africa’s elite and security services. It is, as one lawyer involved in the case wryly puts it, “a slightly Hollywood story”.

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Schefferville, Que., says it’s not ready for a mining boom – by Marika Wheeler (CBC News Montreal – December 8, 2014)

http://www.cbc.ca/news/canada/montreal

Town administrator warns costly work needs to be done now and remote settlement of 230 can’t afford it

The town of Schefferville, Que., said the mining boom is straining the remote northern community’s infrastructure, and it needs help from the provincial government to support the sudden influx of temporary workers.

Schefferville is in northeastern Quebec — a fly-in community due north of Sept-Îles, just a few kilometres from the Labrador border.

It was built near rich iron deposits along what’s known as the Labrador Trough. The mine pits were abandoned about 30 years ago, but a spike in iron prices in 2011 sparked interest in the old sites, and mining companies have returned to the region.

The town population has doubled with “fly-in/fly-out” workers — mining employees who don’t live in town, but fly in for several days, then return home when they get time off. Province should pay for new infrastructure, said town

Schefferville administrator Paul Joncas wants provincial money to pay for major infrastructure investment. “We have work to do on the drinking water system, the sewage system, the infrastructure,” he said. “When the price [of ore] goes up, the mining companies are coming back and they want to go fast.”

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Rio keen to blend mining and marketing – by James Wilson and Neil Hume (Financial Times – December 1, 2014)

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

Pilbara Blend. Robe Valley. Yandicoogina Fines. The names may sound as if they belong on a tea caddy or in a wine cellar – but Rio Tinto investors know better. These are the labels under which the company sells Australian iron ore, the prosaic yet hugely important commodity on which its fortunes depend.

The idea of branding a commodity that is shovelled into blast furnaces to make steel may seem strange. But iron ore has many variations in mineral content and purity.

Miners such as Rio say part of their skill lies in matching ores to the right buyers. Their marketing strategies are therefore crucial to their success – more so this year, when a flood of low-cost supply from Rio and its peers helped to drive the iron ore price down by almost 50 per cent.

Now investors have another important reason to consider Rio’s marketing skills: they are central to a possible tie-up with Glencore, the rival commodities group that this year approached Rio about a potential merger.

Glencore is one of the world’s most successful and entrepreneurial trading companies, spanning commodities such as coal, copper, oil and agricultural products. Its pursuit of a combination with Rio next year may hinge on whether Ivan Glasenberg, Glencore’s chief executive, judges he can extract value from Rio’s iron ore assets – the source of almost 90 per cent of its earnings – with better marketing and trading.

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Brazil’s Vale mulling IPO for part of base metals business – sources – by Nicole Mordant and Euan Rocha (Reuters U.S. – December 1, 2014)

http://www.reuters.com/

VANCOUVER/TORONTO – Dec 1 (Reuters) – Brazil’s Vale SA is considering listing part of its global base metals business, two sources with knowledge of the matter said on Monday, as the miner looks to fund capital projects amid a collapse in iron ore prices.

The sources, who asked not to be named as they have not been authorized to discuss the matter publicly, said the world’s top iron ore producer is likely to retain a majority interest in the new entity if it proceeds with the plan.

Vale could outline the plan to list a new entity in Toronto and London as early as Tuesday at an investor day event being held in New York, said one of the sources.

The event at the New York Stock Exchange will be webcast. The second source said there had been significant discussion inside Vale about listing the base metals assets, which have fared better than its iron ore business due to steadier prices.

A Vale spokeswoman in Brazil could not be reached for comment after hours.

Vale’s iron ore business contributed 62 percent of the company’s gross revenue in the third quarter. Outside of iron ore, Vale’s global asset portfolio includes nickel assets in Canada, Indonesia and New Caledonia, coal mines in Australia and Mozambique as well as copper projects in Canada, Brazil and Zambia.

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