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Iron Ore

Vale steels itself for changing times – by Joe Leahy (Financial Times – June 3, 2014)

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

The helicopter circles over a range of verdant mountains in the Carajás National Forest, a park in Brazil’s Amazonian state of Pará.

In spite of the thick jungle on their lower slopes, some of the peaks are strangely bare. This is a clue as to what lies below the surface – a giant iron ore body known by miners as Carajás Serra Sul S11D, which decodes as Carajás southern mountain range iron ore body 11, block D.

The discovery is so large it will boost the production of Brazilian miner Vale, the world’s second-largest iron ore miner by volume, by nearly a third after it comes on-stream in 2016 compared with the company’s expected production this year of 312m tonnes. Vale claims it is the largest such project in the iron ore industry.

“We are flying above the S11D,” says Jamil Sebe, Vale’s director of northern region ferrous metal projects, above the noise of the helicopter rotors. “Where you have iron, you don’t get trees, that’s one of the ways to discover iron ore.”
Conceived during the commodity supercycle of the past decade, the $20bn project to develop S11D comes as the environment for the industry is changing radically.

Iron ore prices in May suffered their sixth monthly consecutive drop, marking a record losing streak for the steelmaking ingredient.

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TWO MINING BEHEMOTHS BATTLE AN ISRAELI BILLIONAIRE – by Patrick Radden Keefe (The New Yorker – June 2, 2014)

http://www.newyorker.com/

One day in November, 2008, two rival groups of mining executives convened for a meeting in a black office tower on the southern tip of Manhattan. They represented two of the largest mining companies in the world: Brazil’s Vale, and its Anglo-Australian competitor, Rio Tinto. Vale was interested in acquiring a stake in one of Rio Tinto’s most prized projects: a mountain range in the tiny west African nation of Guinea, which contained the planet’s richest deposit of untapped iron ore and was known as Simandou.

When they met that day, executives from Rio Tinto acknowledged that their legal claim to Simandou was under threat. In the summer of 2008, the government of Guinea had rescinded its right to develop the concession, and a new player had emerged on the scene: an Israeli billionaire named Beny Steinmetz, who had made his name in the diamond trade and now had designs on Simandou.

The negotiations between Vale and Rio Tinto eventually fell apart, but Rio Tinto’s concerns turned out to be well founded. Guinea granted Steinmetz’s company, B.S.G.R., exploration rights to half of the Simandou deposit. Then, in 2010, B.S.G.R. announced that it was forming a joint venture to develop the ore—with Vale. The leadership at Rio Tinto was incensed: not only had they lost half of their precious asset to Steinmetz but he had then gone into business with their chief competitor, with whom they had only recently been negotiating a joint venture themselves.

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China prospects forged in steel – by Barry Fitzgerald (The Australian – May 31, 2014)

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

MINERS, commodity experts and China watchers believe this year’s dramatic fall in iron ore is a short-term issue, suggesting that the price of Australia’s biggest export earner will rally to around $US110 a tonne in response to China’s ¬urbanisation and industrialisation demand imperative.

A procession of speakers at the Australia in China’s Century Conference in Melbourne yesterday cautioned against reading too much into the near 30 per cent decline in iron ore prices so far this year to $US95.70 a tonne — a price at which Australia’s highest-cost producers will be feeling the pinch.

They cited a combination of reasons for their faith in the ability of iron ore prices to rebound to around $US110 a tonne. While that would represent a 15 per cent improvement on the current price, it would nevertheless still be 18 per cent below the full-year average in 2013, which matched the year-end price of $US135 a tonne.

Fortescue chairman and major shareholder Andrew Forrest told the conference that Chinese steel production was continuing to run at record levels despite patchy economic indicators.

“The Chinese ability to manage poverty out of its country is unprecedented and their consumption of steel is still running at record rates,” Mr Forrest said.

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Fight to oust Cliffs board just got real ugly – by Frik Els (Mining.com – May 29, 2014)

http://www.mining.com/

Cliffs Natural Resources (NYSE:CLF), the US’ biggest iron ore producer, announced this week that it is reducing capital spending by an additional $100 million on top of the $460 million in cuts already announced.

This led to speculation that Cleveland-based firm could breach certain debt covenants should the weakness in the price of the steelmaking raw material persist.

Cliffs stock was up on Thursday, but investors in the company are nursing a 37% slide in the market value of the company and an exit from the S&P500 index as it tries to cope with a downturn in the market by idling mines in Canada and the US and laying off workers.

Activist investment firm Casablanca Capital launched a bid in January to oust the current Cliffs board and on Wednesday issued another statement calling for drastic changes at the company.

Casablanca, a top shareholder with more than 5% of equity in the miner, called the value destruction at the company “alarming” adding that despite the losses “a majority of the current Cliffs directors, including its chairman, James Kirsch, remain in their seats.”

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Benefits agreement for [Newfoundland and Labrador] Kami iron ore mine announced (CBC News Newfoundland and Labrador – May28, 2014)

http://www.cbc.ca/nl/ The completion of the benefits agreement is a major step for the project, and Labradorians are being told they’ll benefit most, thanks to a Labrador-first hiring protocol. We hear from Natural Resources Minister Derek Dalley, from people on the street in Labrador West – an area still reeling from the closure of the Wabush …

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Swimming in a sea of sharks – by Ashley Fitzpatrick (St. John’s Telegram – May 29, 2014)

http://www.thetelegram.com/

When it comes to iron ore producers, Canada is a minnow in a sea of sharks, according to Alderon Iron Ore president and CEO Tayfun Eldem.

Sea of sharks

Speaking to an Atlantic Provinces Economic Council (APEC) gathering in St. John’s Wednesday morning, he said the country is producing about 45 million tonnes of iron ore a year, almost all from the Labrador Trough region on the Quebec-Labrador border. That production is about one and a half per cent of the total seaborne trade.

He compared this to the region of Western Australia, where mining companies are producing more than 450 million tonnes per year.

About 24 hours before his speech at the Delta Hotel, Alderon’s top man was signing a benefits agreement with the Government of Newfoundland and Labrador, based on the assumption the company’s Kami iron ore mine will be fully financed by the end of the summer — in a world where the sharks are always circling.

The Kami mine would mean $4 billion in tax revenues for the province, $2.6 billion by more conservative government estimates, and 400 long-term jobs post-construction, and would help keep Canada in the game globally as an iron ore producer.

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Kami iron ore mine to tap apprentices – by Ashley Fitzpatrick (St.John’s Telegram – May 27, 2014)

http://www.thetelegram.com/

Pen has been put to paper on an agreement stipulating direct benefits to be seen by Newfoundlanders and Labradorians with the start-up of a new mine in Labrador West.

Premier Tom Marshall (centre) prepares to sign a benefits agreement, alongside Natural Resources Minister Derrick Dalley (left) and Alderon president and CEO Tayfun Eldem. — Photo by Ashley Fitzpatrick

The Kami iron ore mine is being developed under a partnership of Alderon Iron Ore and China’s Hebei Iron and Steel. It is expected to contribute $18 billion to the provincial GDP during a 30-year life, providing the province $2.6 billion in taxes and royalties.

The new benefits agreement looks beyond royalty and taxation numbers, addressing topics including hiring and procurement practices and how the development can help expand the local skilled trades workforce. A signing ceremony was held Tuesday morning at Confederation Building in St. John’s.

The standing deal includes requirements for local-first hiring, the provision of a 40-space child-care centre in Labrador West and a $7-million education and training fund to be provided as the mine goes into production.

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Rio, Guinea Agree on Terms for $20 Billion Iron-Ore Mine – by Jesse Riseborough (Bloomberg News – May 27, 2014)

http://www.businessweek.com/

Rio Tinto Group (RIO), the world’s second-biggest mining company, agreed financial terms with the government of Guinea for a potential $20 billion iron-ore mine, port and rail project that may start by the end of this decade.

The accord will underpin talks with new investors for the rail and port component of developing the Simandou resource, Rio and its project partners Aluminum Corp. of China Ltd., International Finance Corp. and the government of Guinea said yesterday in a joint statement. The parties gave no commitment on when production will start.

Simandou is the world’s largest untapped iron-ore resource and Rio has estimated the mine could produce 100 million tons of the steelmaking ingredient a year. The project could double the West African nation’s current gross domestic product and add 45,000 jobs in the country, according to the statement.

The accord doesn’t commit Rio to building the project and analysts have said a legal dispute over the ownership of adjacent ground at Simandou could delay first production into the next decade. The agreement signed yesterday covers two of four mining permits for an ore-rich area in the southeast of Guinea.

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COLUMN-Tale of two iron ore curves: Which to believe? – by Clyde Russell (Reuters U.S. – May 26, 2014)

http://www.reuters.com/

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

LAUNCESTON, Australia, May 26 (Reuters) – Iron ore swaps traded in Singapore are suggesting that the worst may be over for the steelmaking ingredient, but futures in the Chinese city of Dalian point to further price weakness.

Both can’t be correct, but the divergence of the two contracts does raise the question as to which group of investors has a more accurate gauge on the current balance of risks.

The Singapore Exchange (SGX) iron ore swaps <0#SGXIOS:> tend to be favoured by miners and traders, while the Dalian Commodity Exchange (DCE) futures <0#DCIO:> are mainly used by Chinese steel mills and domestic investors.

The SGX iron ore swaps curve tends to move into backwardation prior to a price decline, reversing the process ahead of a rally by moving into contango.

The shape of the current SGX curve is extremely mild backwardation from the second month onwards, with the second-month contract priced at $97.25 a tonne early on Monday, the six-month at $96.58 and the 12-month at $97.

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Big miners to blame for iron ore fall, says Glencore Xstrata chief Ivan Glasenberg – by Amanda Saunders (Sydney Morning Herald – May 21, 2014)

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

Glencore Xstrata chief Ivan Glasenberg has criticised iron ore miners for putting pressure on prices for the commodity through aggressive brownfields expansions.

Speaking before the latest reading of iron ore spot prices in China showed the price had fallen a further 1 per cent overnight to $US97.50, Mr Glasenberg said Glencore had an advantage over its competitors because it did not produce iron ore.

“We are not big players in iron ore market … prices are coming off because we see massive expansions coming there from our major competitors,” Mr Glasenberg told shareholders at the company’s second annual meeting, on the shores of Lake Zug, in Switzerland, on Tuesday night.

“A large amount of them have these brownfields expansions, they continue to expand … and put more supply into the market. “So we are not heavily exposed to iron ore, except on the trading side, and therefore we believe we have an opportunity against our peers there.” Mr Glasenberg has historically not been shy about pointing out shortcomings among his pure-play mining competitors.

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Iron ore prices teeter – by Matt Chambers (The Australian – May 20, 2014)

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

IRON ore prices last night fell below $US100 a tonne for the first time in nearly two years, hit by uncertainty around China’s steel output and stronger than expected Australian supply that earlier sent mining stocks sliding.

The only other time iron ore prices have previously slipped below $US100 this decade, briefly in 2012, spot-market buying of the nation’s biggest export dried up to the extent that prices rapidly fell another 13 per cent.

Benchmark Chinese iron ore prices fell $US2.20 to $US98.50 late last night, their lowest since September 2012 and in line with indications of weak buying demand shown in Chinese and Singaporean futures yesterday.

Benchmark prices had slipped 2 per cent to $US100.70 in China on Friday night. The fall follows Treasury forecasts in last week’s federal budget showing the price would fall below $US90 a tonne within two years.

This is in line with downgraded forecasts as Australian miners unexpectedly ramp up boom-time expansion projects on or ahead of time, and as the outlook for Chinese demand growth looks less certain.

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Moving Kiruna: what does it take to relocate a city? – by Rhys Thomas (World Finance – April 9, 2014)

http://www.worldfinance.com/

The irresistible call of the world’s biggest [underground] deposit of iron ore is forcing the Swedish city of Kiruna to move two miles east, signalling a new beginning for its citizens. But can this groundbreaking project succeed with so much at stake?

As the northernmost city in Sweden, Kiruna is used to seemingly endless winters, short, cold summers, and relative isolation in the vast expanse of Swedish Lapland. Its population, just shy of 20,000, has learned to expect adverse weather and the long dark night that descends on the city between December and January – all things that are part and parcel of living some 90 miles above the Arctic Circle. They could not have expected the gravity of the newest challenge that the city faces – a problem that simply must be overcome, before it swallows it whole.

When state-owned Luossavaara-Kiirunavaara Aktiebolag (LKAB) – one of Sweden’s biggest mining companies – told the residents of Kiruna it needed to dig deeper into the mountain near the city to extract more iron ore, some eyebrows might have been raised. Veterans of the city would remember that in the 1970s rampant expansion forced the city’s Ön district to be vacated and the residents moved elsewhere.

What they probably didn’t realise was the scale of what would have to happen this time. LKAB didn’t want one district to be vacated.

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In The Amazon, A New Mining Frontier For Iron Ore – by Marina Amaral (Huffington Post/Angencia Publica – March 4, 2014)

http://www.huffingtonpost.com/theworldpost/

Meet Canaã dos Carajás, the new frontier of iron ore mining. It’s in the South of Brazil’s Para, where jobs and mining royalties did not bring as much progress as expected.

Between 1982 and 1985, Brazil’s last military ruler, João Figueiredo, settled 1,551 families through colonization projects around the mining area of the Carajás Forest, in the south of Para state in the Amazon. The project to exploit the world’s biggest high-grade iron ore, discovered in 1967, started to get momentum after the first mine in Serra de Carajás (Carajas Hills) was opened. Today it is a complex that produces about $13 billion worth of iron ore per year, most of which is exported.

The early settlers, however, had no idea that they were going to live on top of the “biggest project ever” of Vale — the world’s second mining corporation.

The goal of the military government was to reduce land conflicts in the Bico de Papagaio (“Parrot’s Beak”) region. The region was the center of the Araguaia guerrilla in the 1970s and is mainly situated around reserves holding an estimated 18 billion tons of iron ore, as well as deposits of manganese, copper, nickel, and gold.

Today, Vale digs 110 million tons of iron ore from the North Hills of Carajás. With the new project, called S11D, the company aims to double the production by exploring the South Hills of Serra dos Carajás until 2016.

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Will a Goa-type crisis befall Odisha iron ore mines? – by Kunal Bose (Business Standard – May 12, 2014)

http://www.business-standard.com/ [India]

Unlike India, China is becoming increasingly dependent on iron ore imports to sustain its ever-rising steel production

When he was chairman of Steel Authority of India Ltd (SAIL), Sushil Kumar Roongta had a major role in convincing New Delhi that India was advantageously placed to become the world’s second-largest steelmaker. He argued the rich deposits of iron ore here, if properly harnessed, would enhance India’s steel capacity to 300 million tonnes (mt). This is despite our growing dependence on coking coal imports which in 2013-14, stood at 33.3 mt.

Roongta said while the blast furnace would remain the principal steelmaking route for India, technology breakthroughs such as Finex, developed by South Korean company Posco, would allow us to make steel with iron ore fines and non-coking coal, local deposits of which are 295 billion tonnes (bt). India has iron ore resources of 30 bt and these are to rise 5-10 bt as the cut-off point of iron content in ore is reduced from 55 per cent to 45 per cent. So, the country’s long-term self-reliance in this critical steel input is not to be doubted.

India’s high ore imports in recent times have resulted from significant dislocations in mining in more than one state. Unlike India, China is becoming increasingly dependent on iron ore imports to sustain its ever-rising steel production. In 2013, as China raised its share of world crude steel production to 48.5 per cent, with production of 779 mt, it also imported a record 820 mt to supplement domestic supplies.

To the dismay of our steel, sponge iron and pellet producers, dark clouds have started gathering over the iron ore sector in Odisha. The mineral produced in Odisha has a strategic bearing on the steel sector in eastern states, which account for 60 per cent of the country’s 80-mt annual metal output.

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NEWS RELEASE: Zeldes Haeggquist & Eck LLP Announces Investigation of Cliffs Natural Resources, Inc.

May 12, 2014 09:01 AM Eastern Daylight Time

SAN DIEGO–(BUSINESS WIRE)–Zeldes Haeggquist & Eck, LLP, a shareholder and consumer rights litigation firm has commenced an investigation into Cliffs Natural Resources, Inc. (“Cliffs” or the “Company”) (NYSE: CLV) for securities law violations in connection with the Company’s initial public offering (“IPO”).

“deeply concerned by the destruction of shareholder value suffered by shareholders.”

Cliffs is an ire ore mining company incorporated and headquartered in Cleveland, Ohio, which had been developing three large iron ore and chromite mines in Canada. On February 15, 2013, Cliffs conducted an IPO in which it sold $675 million of stock to investors. Since the IPO, the stock has fallen nearly $6 per share, or 25%, to approximately $19 per share, wiping out over $162 million in shareholder value.

Our investigation focuses on whether Cliffs failed to disclose material information to investors regarding problems or delays with its Canadian mines. Specifically, we are investigating whether Cliffs made false statements or material omissions in its Registration Statement and Prospectus regarding development delays and operating and infrastructure problems at several of Cliffs’ iron ore and chromite mines in Canada.

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