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Iron Ore

Iron ore giants eating little guys now, but cannibalism looms – by Clyde Russell (Reuters U.S. – September 3, 2014)

http://www.reuters.com/

Clyde Russell is a Reuters columnist. The views expressed are his own.

LAUNCESTON, Australia – (Reuters) – There was maybe more than a touch of hubris in Rio Tinto boss Sam Walsh’s recent comment that it’s time for other iron ore producers to “really feel the consequences” of the current low price.

The chief executive of the world’s No.2 iron ore miner was speaking after his company’s first-half results last month, basically delivering the message that Rio Tinto is going to keep going full-steam ahead on its iron ore expansion plans.

Walsh, along with the bosses of top iron ore miner Vale and No.3 BHP Billiton, is betting that their low-cost, high volume model will force smaller competitors to the wall, leaving them the undisputed kings.

Perhaps he should have a word or two with the chief executives of coal miners, which, oddly enough, includes himself given Rio Tinto’s extensive coal assets.

When the price of both thermal and coking coal started to decline in mid-2011, the word from the industry was that this wasn’t too big a surprise, but no need to worry as Chinese demand will ensure prices don’t fall too far, and all the new capacity brought on and planned will be profitable.

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Mining overregulation curbing key to our future, says Rinehart – by Barry FitzGerald (The Australian – September 4, 2014)

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

Billionaire iron ore magnate Gina Rinehart believes the Abbott government has more to do after fulfilling its election promise to axe the carbon and mining taxes.

A strong critic of the now-abandoned mining tax on the iron ore and coal sectors, Mrs Rinehart said “overregulation and the high costs of approvals and compliance remain as huge impediments’’.

Writing in her regular column in Australian Resources and ­Investment, out today, Mrs Rinehart said that mining should not be seen as a dirty word, but as an industry critical to Australia’s future. “Unfortunately it is an industry facing problems,” she said.

“We can’t afford to overregulate and overburden industry if we want to remain competitive and maintain our standard of living.      “ We should instead be focused on making our country’s exports sustainable in the world markets, for the benefit of Australians and Australia’s ­future.”

Mrs Rinehart — Australia’s richest person and the major shareholder in Fairfax Media — said low-cost nations, particularly in places like Africa and parts of Asia, were seeking out investors to develop their resources.

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Iron ore slide to $US75 will hit Australian suppliers: analyst – by Paul Garvey (The Australian – September 3, 2014)

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

IRON ore prices will fall to as low as $US75 a tonne next year and begin knocking out Australian sources of supply, a leading commodities analyst has warned.

Ian Roper, a former analyst with Rio Tinto who now works out of Shanghai for CLSA, has made further cuts to his iron ore price outlook in response to a stronger than expected ramp-up in supply by Australia’s iron ore miners.

Mr Roper now expects the iron ore price to fall to $US75 a tonne by September 2015, compared to his previous forecast for prices to drop to $US80.

The benchmark iron ore price has already fallen by more than 37 per cent this year to around $US87.10 a tonne.

While smaller iron ore miners are hoping that high-cost Chinese iron ore production will put a floor under the price and stop the price slide, Mr Roper argued that prices would continue to fall and flagged closures would spread to international iron ore suppliers including Australia.

He said iron ore was likely to follow a similar path to the coal price, which has been hovering at lows for two years as marginal mines battle to stay in production. Mr Roper also argued Chinese steel mills would be reluctant to shut their own iron ore production capacity.

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UPDATE 1-Australian state to sell around $2 bln in assets as mine boom ends – by James Regan (Reuters India – August 28, 2014)

http://in.reuters.com/

SYDNEY, Aug 28 (Reuters) – The state of Western Australia on Thursday said it planned to sell government-owned assets, including part of the Port Hedland shipping terminal, for an estimated A$1 billion to A$2 billion ($1.9 billion) as its resource-heavy economy adjusts to the collapse of a decade-long mining boom.

The move will precede other unspecified sales of land and assets that could fetch another A$4 billion to A$5 billion over the next two or three years, said state premier Colin Barnett.

Barnett, said his priority was to reduce debt and regain a triple-A credit rating for Western Australia. He once hailed the state as the economic engine for Australia, but it is now struggling to pay its bills.

“These are the first assets we will open up to the market. They have been identified as priority assets for sale,” Barnett said in a statement.

Moody’s this week downgraded Western Australia’s credit rating to Aa1 from Aaa. “The ratings downgrade reflects the state’s ongoing deficit position, the deterioration in its debt metrics, and a growing risk that this trend may not be reversed soon,” the ratings agency said.

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Gogebic’s formal request for iron ore mine to be delayed – by Lee Bergquist (Milwaukee – Wisconsin Journal Sentinel – August 26, 2014)

http://www.jsonline.com/

Company won’t finish all environmental fieldwork this year

Gogebic Taconite’s plans to submit an application to develop a $1.5 billion iron ore mine will be pushed back from the spring of 2015 until at least the fall of next year, the company says.

The company won’t finish all fieldwork this year and will be forced to conduct additional environmental work next year, according to Bob Seitz, a spokesman for the company.

The delay comes after the company and supporters said state regulators needed to be more time-conscious of big capital-intensive projects, and they pushed lawmakers to make changes in state law to speed up the review for the massive mine.

“We were kind of hellbent for leather to get past the research phase this year, but we realize that we are not going to be able get that done,” Seitz said.

Southern Wisconsin may still be in the grips of summer, but leaves are beginning to change in the far north. That’s prompting Gogebic to wrap up some fieldwork already.

On a hillside along Highway 77, the company wants to transform forestland into a mine and processing plant that would produce taconite to make steel. Preliminary core samples show significant deposits of iron ore.

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BHP Billiton set to expand Pilbara iron ore operations – by Matt Chambers (The Australian – August 25, 2014)

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

BHP Billiton chief executive ­Andrew Mackenzie says iron ore prices are unlikely to climb back above $US100 a tonne but the company is readying to spend an extra $US3.25 billion ($3.5bn) to bring more ore on to the market in a bigger-than-expected expansion of its West Australian mines.

As iron ore prices last week slid to about $US90 a tonne and approached five-year lows, Mr Mackenzie said he was not counting on a price floor forming.

At the same time, in a declaration largely lost amid BHP’s plans for a $US14bn spin-out of non-core assets, the world’s biggest miner says it is looking to expand its Pilbara iron ore mines and ports to annual capacity of 290 million tonnes a year.

This is up from a previous target to grow to 270 million tonnes and at a forecast capital cost that is dramatically lower than guidance given to analysts a year ago.

“We would say it is quite unlikely that we would see prices north of $US100 a tonne, so our forecasts are obviously based on something below that,” Mr Mackenzie told British media when asked if there might be a price floor around current price levels.

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End of Australia’s mining boom threatens Pilbara Cities plan – by Jamie Smyth (Financial Times – August 20, 2014)

 

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

Port Hedland, Australia – In a dusty industrial estate next to the world’s biggest iron ore port in Western Australia’s remote Pilbara region, business has never been so bad.

“The rents got so high in the town that when the boom ended, businesses began to die off everywhere,” says Jo Woodward, owner of Jems, a ramshackle building with an eviction notice stuck to its padlocked gate that was recently Port Hedland’s only legal brothel. “Nothing is selling here now.”

The demise of Jems, and of many other Pilbara businesses that have closed their doors following the end of the country’s mining investment boom, suggests Australia may struggle to realise one of its flagship projects.

Port Hedland and neighbouring Karratha grew rapidly during a decade-long boom as workers flooded into the Pilbara to construct the iron ore mines, railways and ports needed to feed Chinese demand for steel.

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Vale secures key licence for flagship iron ore mine expansion – by Cecilia Jamasmie (Mining.com – August 21, 2014)

http://www.mining.com/

Brazil’s Vale (NYSE:VALE), the world’s largest producer of iron ore, has secured a key environmental licence for a 90 million tonnes a year expansion of its flagship iron ore mine in the Carajás complex, in the northern state of Para.

The nearly $20 billion plan is expected to start production in 2016 and reach full capacity of 90-million tonnes a year of iron-ore in 2018, or nearly a third of Vale’s existing annual output.

In a statement Wednesday evening, the company said Brazil’s environmental regulator Ibama had granted it a preliminary license for its plans to expand its N4WS, N5S, Morro I and Morro II projects at the Carajás complex, which combined would give Vale an additional 1.8 billion tonnes in reserves.

The expansions are considered vital for Vale as the miner has been losing market share to Rio Tinto (ASX, LON:RIO) and BHP (ASX:BHP).

Carajás, located in a remote corner of the Amazon rainforest, currently holds the world’s largest iron ore deposits with 7.2 billion tonnes combined in proven and provable reserves. It accounts for 35% of Vale’s annual ore output of more than 300 million tonnes. Last summer Vale received a licence from the Environmental Protection Agency of Brazil to build a $19.5 billion railway expansion to its Serra Sul mine, part of the Carajás complex.

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Batista’s MMX to Halt Work at Mine as Iron-Ore Falls – by Juan Pablo Spinetto (Bloomberg News – August 20, 2014)

http://www.bloomberg.com/

MMX Mineracao & Metalicos SA (MMXM3), the mining unit of former billionaire Eike Batista, will temporarily stop operations at its only producing mine as it seeks to avoid bankruptcy protection amid lower metal prices.

The Brazilian iron-ore producer will give workers at its Serra Azul unit in Minas Gerais state a 30-day “collective vacation,” MMX said in a statement today. The furlough will begin during the first week of September.

“The necessity of the collective vacation and temporary stop of the production activities at the Serra Azul Unit is a consequence of the significant and prolonged decline of the iron-ore price,” MMX said in the statement. The measure also stems from “the operating restrictions imposed by the environmental authorities of the state of Minas Gerais.”

MMX is reviewing its business plan to bolster cash as iron-ore prices decline. The company will pay workers during the furlough, MMX said in an e-mailed reply to questions.

Batista, once Brazil’s richest person, has been selling assets as missed targets, mounting debt and accumulating losses forced his oil and shipbuilding companies to enter Brazil’s so-called judicial recovery proceedings last year.

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Diversified mining giants becoming less so – by Lawrence Williams (Mineweb.com – August 19, 2014)

http://www.mineweb.com/

Confirmation that BHP Billiton is planning to demerge what it considers its non-core assets into a new company continues the trend for the world’s biggest miners to simplify their structures.

LONDON (MINEWEB) – The big post 2008 fallout in the global mining sector has been a major influence on corporate policy since. It has already seen the culling of the chief executives who had the misfortune to be in place as metal prices slumped and profits collapsed. They had previously been exhorted by their institutional shareholders to go for growth almost at any cost.

But once it became apparent that some of the huge capital programmes involved were actually having a negative impact on the bottom line, helped by the fact that the concentration on growth had led to management’s eyes being taken off controlling costs at existing operations, then institutional pressures changed and heads started to roll. CEOs became an endangered species

Now it looks as though there is something of a different tack coming into play. For the single commodity players – e.g. those in the precious metals sector there has also been a move to demerge, or just sell what are considered to be non-core assets – those that had appeared to be taking up too much management time and effort, but without complementary returns. A typical example of this has been Barrick Gold’s floating off of African Barrick which now at least seems to be turning itself around, but still probably falls short of its parent’s return requirements. Others have been divesting of so-called non-core projects piecemeal.

But while the gold miners were relatively quick to act – the big diversified miners perhaps took a little more time over their moves to do likewise.

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Rio and BHP tighten grip on world iron ore – by John Addis (Sydney Morning Herald – August 18, 2014)

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

Mexican drug cartels have been diversifying into the iron ore business, smuggling ore worth about $US1 billion a year into China. But it’s the emergence of a more legitimate cartel – one run largely by Australians – that should worry China more.

Rio’s latest result shows how powerful the big three global producers have become. The company’s results for the six months to June 30, with underlying earnings rising 21 per cent to $US5.1 billion ($5.47 billion), are remarkable given that iron ore prices actually fell 20 per cent over the period.

After slashing costs, capital expenditure and debt, management hinted at higher dividends and more buybacks. If the mining boom is supposed to be over, no one told Rio Tinto.

The really interesting element to the result concerned production increases. Although lower iron ore and coal prices stripped $US1.4 billion from underlying earnings, volume increases, particularly in iron ore, offset that fall by more than $US900 million. All up, iron ore contributed more than 90 per cent of total profit.

With China slowing and the country’s government frantically shifting spending away from capital expenditure towards consumption, which dampens demand for ore, Rio Tinto and BHP are expanding output.

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Steel consortium undecided on size of Afghan iron ore investment – by Krishna N Das (Reuters India – August 11, 2014)

http://in.reuters.com/

NEW DELHI – (Reuters) – A consortium led by the Steel Authority of India (SAIL) (SAIL.NS) has yet to decide how much it will commit to an iron ore project in Afghanistan that was originally supposed to be a $10.8 billion investment, SAIL’s chairman said on Monday.

The steel ministry said in December that the group had proposed new terms and planned to invest about $2 billion in three iron ore mines and a steel plant.

But SAIL Chairman C.S. Verma said the consortium had not signed a final deal and total investments could only be decided after having a detailed project report.

“Conditions are quite difficult,” he said, referring to security problems and a lack of infrastructure in the area. “We are keeping all our options open.” “Only time will tell how we are able to take up this proposal,” he said after announcing SAIL’s April-June quarter results.

The consortium also includes Indian companies such as NMDC (NMDC.NS), Rashtriya Ispat Nigam, JSW Steel (JSTL.NS), Jindal Steel & Power (JNSP.NS) and Monnet Ispat & Energy (MNET.NS). As part of its investment, it could spend $75 million to $100 million on the initial exploration of the mines, Verma said.

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Miners battle to keep Ebola at bay in West Africa – by Karen Rebelo (Reuters U.S. – August 8, 2014)

http://www.reuters.com/

(Reuters) – Contractors at ArcelorMittal SA’s iron ore mine in Liberia are evacuating the country and other miners are sending staff home to prevent the spread of the deadly Ebola virus.

Mining companies in West Africa are acting swiftly to keep Ebola at bay, screening employees and restricting access to remote mining camps while keeping production of iron ore and gold ticking.

A prolonged outbreak, however, will threaten mineral production in Sierra Leone, Liberia and Guinea if essential supplies are disrupted and employees stay away from work too long.

Or worse: should a miner or family member contract the virus. “I think everyone is mindful that it’s something that has the potential to impact businesses,” said Mark Bristow, chief executive of Randgold Resources Ltd, which mines gold in Mali, across the border from Guinea.

Though it has no mines in countries affected thus far, Randgold is among several miners in West Africa to have launched preventive measures against an outbreak that has killed more than 900 people in four countries.

The World Health Organization has called the epidemic an “extraordinary event” that constitutes an international health risk. There is no known cure for Ebola, which is transmitted through direct contact with bodily fluids.

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Bottom reached for coal, iron ore? – by Oliver Probert (Australian Journal of Mining – August 07, 2014)

http://www.theajmonline.com.au/

An ANZ commodities expert says iron ore and coking coal prices may have reached their bottom, and he’s singing from the same hymnbook as at least one mining executive.

A report from Mark Pervan, global head of commodity strategy for ANZ, this week said that with the stabilisation of the overall macro environment, commodity markets are entering the second half of 2014 on a positive note.

While an increase in commodity prices is likely to occur, the report says, it will be a modest one, however.

“Overall, the backdrop looks accommodating for commodity markets in H2 2014,” Pervan’s report states. “But the upside looks limited over the next month or two until we see this supported by a pick-up in physical demand, which is expected later in the year.”

Commenting specifically on mined bulk commodities, Pervan wrote: “Supply-side issues remain, but the bottom appears to have passed for coking coal and iron ore. Seasonal drops in power demand will cap any thermal recovery.”

Pervan’s confidence in iron ore was echoed by Atlas Iron chief executive Ken Brinsden, who was referenced in a number of mainstream media outlets for his comments at the Diggers & Dealers conference in WA this week.

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UPDATE 2-Glencore courts Guinea’s iron ore treasures- document – by Silvia Antonioli and Alexandra Reza (Reuters India – July 6, 2014)

http://in.reuters.com/

LONDON, Aug 5 (Reuters) – Miner and commodity trader Glencore has expressed interest in iron deposits in Guinea, a presentation obtained by Reuters shows, although the company said it had not pitched for a stake in Simandou, the country’s largest deposit.

Glencore is the latest mining major looking to invest in iron ore assets in Guinea. Most interest is focused on Simandou, one of the world’s biggest deposits.

Any potential investors in Simandou are treading carefully, however. Israeli-owned BSG Resources, which was stripped of its license to develop part of Simandou following a Guinean corruption investigation, is seeking arbitration and has threatened to sue companies that invest in its former license area.

Three sources close to the government said London-listed Glencore had indicated its interest in investing in Simandou, in a meeting with government officials in Conakry in June.

A copy of a power point presentation, which the sources said a Glencore representative delivered at the meeting, includes a reference to Glencore having the financial and technical ability to develop big projects in the region and “the willingness to proceed very quickly together with the government to the exploitation phase of iron ore projects”.

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