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Iron Ore

Aluminium’s day dawns as iron ore dims – by Matt Chambers (The Australian – May 12, 2014)

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

Tinto’s much-maligned aluminium business could be a surprise saving grace for the miner as iron ore prices soften, with the company’s cost-cutting drive set to produce strong cashflows and boost the chance of big returns to shareholders.

The turnaround in aluminium, which Deutsche Bank is forecasting will contribute $US2 billion ($2.1bn) of annual free cashflow to Rio by 2017, comes as chief executive Sam Walsh predicts an end to the Chinese overcapacity that has hobbled the industry in recent years.

While there is no hope of recovering the $US25bn of value wiped from the aluminium unit’s book value since Rio paid $US40bn in cash for Alcan just before the global financial crisis, some investors are positioning themselves for a rebound.

“We have shareholders on our portfolio because they ­believe our aluminium business is going to be very prospective,” Mr Walsh told the company’s annual meeting in Melbourne last week. “That’s their call, but it is an indication that people ­expect there will be improvement in the business.”

Deutsche Bank analysts also sense a change.

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Fortescue Metals to diversify beyond China – by Jamie Smyth (Financial Times – May 6, 2014)

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

Fortescue Metals Group, one of the “big three” Australian iron ore miners, is expanding its customer base beyond China as global investors fret over how a slowdown in Chinese economic growth will affect steel demand.

Nev Power, Fortescue’s chief executive, said the company was supplying some customers in South Korea, and wanted to trial iron ore sales to Japan and across Asia.

“We will keep an open mind as other economies such as India develop. The Taiwanese are developing a steel mill in Vietnam so there is starting to be diversification. I think there are opportunities for us,” he said.

The price of iron ore – used in steelmaking – suffered one of its biggest one-day falls in March over fears that a cooling Chinese economy would damp demand for the raw material at a time when production reached record highs.

Iron ore prices fell again last week following a warning by Vale, the Brazilian miner, that supply had outstripped demand for the first time in a decade due to softening China demand. Mr Power said price volatility was being driven by the rundown of high stock levels at Chinese ports, and Beijing’s recent crackdown on iron ore import loans.

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China’s Baosteel in $1 billion bid to revive Australia iron ore project – by Sonali Paul (Reuters U.S. – May 5, 2014)

http://www.reuters.com/

SYDNEY – (Reuters) – Chinese steel giant Baosteel Resources and an Australian partner launched a $1 billion takeover bid for Australian explorer Aquila Resources in a move that could help break the grip of mega iron ore exporters Rio Tinto and BHP Billiton.

Monday’s unsolicited A$1.14 billion ($1.06 billion) offer to take over Aquila Resources Ltd (AQA.AX) could open up a new Australian iron ore export region to supply Asian steelmakers, by jumpstarting the $7 billion West Pilbara Iron Ore project (WPIO), half-owned by Aquila.

State-owned Baosteel’s move would be the biggest foray into an undeveloped iron ore project in Australia by a Chinese investor since CITIC Pacific’s (0267.HK) $10 billion Sino Iron project, which began producing last year after massive cost blowouts and delays.

Baosteel, which already has a 20 percent stake in Aquila, said it first invested in the company back in 2009 to help it fund the iron ore project and a separate coking coal mine.

“But after five years we haven’t seen any projects being started. So we have been very patient, but we’ve become frustrated,” chief financial officer Wu Yiming told reporters on a conference call from Sydney.

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Baffinland could start mining Mary River this summer – by CBC News North (May 05, 2014)

http://www.cbc.ca/north/

Baffinland Iron Mines Corporation could begin its first phase of extracting ore from the Mary River mine site this summer.

The scaled-down version of the iron mine on North Baffin Island got its final approval from Minister of Aboriginal Affairs and Northern Development Bernard Valcourt last week, following recommendations from the Nunavut Impact Review Board.

NIRB plans to hold a final workshop by conference call mid-May to prepare a project certificate, which will outline the terms and conditions, and the agencies responsible for them, that the mine will have to meet in order to keep operating.

Greg Missal, vice-president of corporate affairs with Baffinland, said the company was pleased with the final terms and conditions imposed on the mine and will start mining iron ore at the site this summer or fall.

“It’ll start to be trucked up to Milne Inlet and it’ll be ready to be loaded onto ships during the open water season of 2015.” The dock that will carry that ore on to ships is now being designed and engineered. Missal said that dock will determine the precise number of ships needed to move the ore.

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Driverless mine trucks heading for east coast – by Matt Chambers (The Australian – May 5, 2014)

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

DRIVERLESS mining trucks that are becoming more common in iron ore mines in Western Australia’s Pilbara region are expected to appear in NSW and Queensland in the next 12 months under plans being hatched by BHP Billiton.

The autonomous trucks, which cut costs by reducing the need to house, feed and employ four drivers, would be trialled at BHP coalmines, BHP coal president Dean Dalla Valle said.

BHP has followed the lead of rival Rio Tinto in introducing the robot trucks into the big iron ore mines in the Pilbara, but after coalmine trials in New Mexico, it is taking the lead in bringing them to the east coast, something Rio has not yet proposed to do.

“We’re looking at two opportunities in coal to do the same thing, in Queensland and NSW,” Mr Dalla Valle told The Australian. “There’s no doubt it will happen, and I’d like to think that within 12 months we will be running trials.”

BHP last month indicated its late-mover status in automated equipment was not a reluctance to employ the technology. It said it was extending a robot truck trial at its Jimblebar iron ore mine to the nearby Wheelara mine.

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China’s need for steel will sustain ore miners: Rio – by Andrew Burrell (The Australian – May 2, 2014)

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

RIO Tinto iron ore boss Andrew Harding says iron ore prices will remain strong for at least another 10 to 15 years, declaring he pays no attention to short-term fluctuations in the price of the key export commodity.

Speaking at the In the Zone conference at the University of Western Australia, a bullish Mr Harding said the most important indicator for iron ore was the rate of urbanisation in China, which buys 60 per cent of the world’s seaborne iron ore.

With the iron ore price slipping to $US105.40 ($113.53) yesterday — a 20-month low — and prompting a sharp fall in iron ore miners’ shares, some analysts have forecast a return to prices well below $US100 in coming months as increased supply hits the market and Chinese economic growth slows.

That would hit the profits of Rio and its Pilbara iron ore rivals BHP Billiton and Fortescue Metals Group. It would also eat into the coffers of the cash-strapped federal and West Australian governments.

The three big iron ore miners have pulled back on their future expansion plans, preferring to preserve cash and boost productivity rather than commit to multi-billion-dollar greenfields projects.

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World’s heaviest haul railways defining the Pilbara then and now – by Ben Collins (Australian Broadcasting Corporation – May 2, 2014)

http://www.abc.net.au/northwestwa/?ref=banner

Iron ore trains are one of the unsung heroes of the Pilbara’s mammoth industry. Leading the world in heavy haulage, these trains also track the history of the region.

It was an inauspicious dawn of the rail age in Australia’s north western Pilbara region. But what began with short tramways and a problematic narrow gauge line from Port Hedland to Marble Bar over one hundred years ago, eventually became the lifeblood of Australia’s economic engine room.

As in many North West towns established in the late 1800s, tramways were built to service the early ports at Cossack and Balla Balla in the Pilbara. A more substantial railway, though still just narrow gauge, was built from Port Hedland to Marble Bar to service goldmining and the pastoral industry. The 114 mile railway was completed in 1912, and proceeded to run at a loss for 39 years until the last train came to a halt in 1951.

But a new era of heavy haulage standard gauge railways burst into existence with a flood of iron ore mines in the 1960’s. The first earthworks for the rail bed began in 1965 as iron ore mining permits and sales contracts were put in place for the Goldsworthy iron ore deposit. Construction proceeded at a cracking pace with over 100 kilometres completed and the first train running by May 1966. The line was then extended by 67 kilometres to the Shay Gap iron ore mine in 1972.

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Vale: Iron ore price to improve second half of the year – by Frik Els (Mining.com – May 1, 2014)

http://www.mining.com/

Murilo Ferreira, CEO of Brazilian mining giant VALE (NYSE: VALE), knows how to talk his book – he’s regularly been the most optimistic about the direction of the iron ore price of the large producers.

The Rio de Janeiro-based miner’s first quarter results disappointed with earnings falling 19% and sales of $9.5 billion coming in more than $1.5 billion below expectations in large part due to lower iron ore realized prices.

During the earnings call Ferreira was undeterred:

“We expect that the price in the second half will be better than the first half. One thing is for sure the price will not go below $110 on a sustainable basis. I think we have many time seen the price going below this level, but recovering very fast […] because those are the level that many producers mainly in China will leave the market

Ferreira, at the helm of the $70 billion firm since May 2011, does caution that since supply is going to be steady, his prediction would depend on improvement on the demand side “not only in China, but outside China.”

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Nickel bolsters Vale’s bottom line – by Jeb Blount (Reuters/Sudbury Star – May 1, 2014)

The Sudbury Star is the City of Greater Sudbury’s daily newspaper.

Brazilian miner Vale SA said on Wednesday that first-quarter profit fell by nearly a fifth, a result in line with expectations, after the price of iron ore, its main product, fell sharply.

Net income fell 19% to $2.52 billion, compared with $3.11 billion in the same quarter of 2013, according to a securities filing. The result was near the $2.59 billion average estimate in a Reuters survey of 13 analysts and comes after a $6.54 billion fourth-quarter loss.

Vale Chief Executive Officer Murilo Ferreira has been working to slash costs and unload unprofitable businesses for more than a year as a slowdown in Chinese growth limits demand for iron ore and other metals. China, the world’s largest steel producer, is the biggest market for iron ore, the main ingredient in steel.

Vale is the world’s largest iron ore producer and a major miner of nickel, copper and fertilizers. In Sudbury, Vale is the city’s largest employer and runs mines, mills and a smelter. Nickel and copper are the main minerals produced in Sudbury.

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No surprise mining taxes [Australia] please: Rio head – by Kim Christian (Sydney Morning Herald – May 1, 2014)

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

Rio Tinto’s head of iron ore Andrew Harding has warned Australia should not squander its reputation as a stable place to do business.

As the iron ore-focused miner began legal action in the US against its Brazilian rival Vale, Mr Harding urged the Australian government not to introduce surprising tax changes which could deter foreign investment.

“It really does startle an organisation,” Mr Harding told a business lunch in Perth. “Australia’s not the only place you can mine iron ore. “There’s an awful lot of high grade iron ore sitting in Africa, and for a whole lot of instability reasons it hasn’t been mined to date.”

His comments come as Rio Tinto filed a lawsuit in the US District Court against Brazilian miner Vale and an Israeli company over the rights to develop the massive Simandou iron ore deposit in Guinea in west Africa.

Rio alleges billionaire Beny Steinmetz and his company BSG Resources bribed officials and conspired with Vale to steal mining rights to the multi-billion tonne Simandou deposit but it has not specified the amount of damages it is seeking. Mr Harding said a period of volatile industrial relations and iron ore supply disruptions in Australia several decades ago had opened the door for Brazil to build the biggest iron ore business in the world.

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Baffinland wins approval for scaled-down Nunavut iron mine (CBC News North – April 29, 2014)

http://www.cbc.ca/north/

Baffinland Iron Mines has won the go-ahead to proceed with a considerably scaled down version of its proposed iron mine on North Baffin Island.

In December of 2012, Baffinland was approved to move 18 million tonnes of iron ore each year, shipping it first by rail to the west coast of Baffin Island, then by ships that would travel year round through the ice-choked waters of Foxe Basin to markets in Europe.

Just weeks after winning approval for the plan, Baffinland changed it, proposing a phased approach that would move about 3.5 million tonnes of ore per year using an existing road and port on the eastern side of Baffin Island, and citing the poor economy as a reason for doing so.

To accommodate the change of the plans, the Nunavut Impact Review Board modified 44 of its initial 182 terms and conditions for the mine and added eight new ones.

In a letter to the Nunavut Impact Review Board today, Bernard Valcourt, minister of Aboriginal Affairs and Northern Development, accepted most of those changes, modifying nine and rejecting one.

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War of Titans: Rio Tinto suing Vale over iron ore rights in Guinea – by Cecilia Jamasmie (Mining.com – April 30, 2014)

http://www.mining.com/

In a new and unexpected twist in the battle to control Guinea’s rich Simandou iron ore deposits, the companies once operating in the area have began a series of billion-worth lawsuits, with iron ore miner No.2 Rio Tinto (LON, ASX:RIO), suing the world’s largest producer Brazil’s Vale (NYSE:VALE).

The first one to shoot was Vale, which filed Monday an action against his former partner in Guinea BSG Resources, the mining arm of Israeli tycoon Beny Steinmetz’s empire, before the London Court of International Arbitration, Swiss newspaper Le Temps reports (in French).

One of the paper’s sources said Vale is seeking a minimum compensation of US$1.1 billion, due to losses suffered because BSGR’s actions in Guinea. Last week, The West African nation concluded that BSG Resources obtained the Simandou and Zogota concessions through corrupt practices and decided to revoke all mining rights for both companies.

Vale had a 51% stake in the project, which acquire from BSGR in 2010 in a $2.5bn deal.The company however only paid $500 to Steinmetz’s firm, suspending all instalments left as soon as it learned of the accusations against its partner.

Guinea’s President Alpha Conde said Wednesday it was clear the Rio de Janeiro-based firm did nothing wrong, adding the mining giant is free to reapply to acquire rights to one of the largest untapped iron ore deposits in the world.

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UPDATE 2-Guinea president – Vale did no wrong, can bid to reclaim mining permits – by Stephanie Nebehay (Reuters India – April 30, 2014)

http://in.reuters.com/

GENEVA, April 30 (Reuters) – Guinea’s President Alpha Conde said on Wednesday he hoped Brazilian miner Vale would bid to reclaim two iron ore permits, because the company had not been involved in the alleged corruption that led to their cancellation.

Guinea cancelled the two mining concessions jointly held by Vale and BSG Resources earlier this month, after a government-appointed technical committee accused BSGR of obtaining the rights through corruption.

BSGR, the mining branch of Israeli billionaire Beny Steinmetz’s conglomerate, has denied the allegations and said it will seek international arbitration. Conde told reporters during a visit to Geneva on Wednesday that Vale, the world’s largest iron ore producer, had done nothing wrong.

“We will launch an open and transparent bidding process … Vale was not involved in the corruption or aware of it and we strongly hope that Vale will participate,” Conde said.

“Vale can come back through the bidding process,” he added.

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Vale considers action after iron ore rights revoked – by Tom Burgis (Financial Times – April 27, 2014)

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

Vale is weighing legal action after Guinea formally cancelled multi-billion-dollar iron ore rights that the Brazilian mining group held jointly with Israeli tycoon Beny Steinmetz’s family conglomerate following a two-year corruption inquiry.

The revocation of the rights came two weeks after a government inquiry in the west African nation concluded that BSG Resources, the mining arm of Mr Steinmetz’s business empire, won them through a bribery scheme before agreeing to sell a majority stake in its Guinean assets to Vale for $2.5bn in 2010.

Vale, the world’s biggest iron ore miner, said on Friday that it was “actively considering its legal rights and options”. A spokesperson for the group declined to elaborate on its plans on Sunday.

BSGR denies wrongdoing and says it is the victim of a plot to seize its assets. The Guernsey-registered company has said it will “prove the allegations raised in Guinea’s rigged and illegitimate process are false” and has threatened to take Guinea to international arbitration. BSGR declined to comment on Vale’s statement.

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BHP still sees [Pilbara] greenfields – by Andrew Burrell (The Australian – April 23, 2014)

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

BHP Billiton iron ore boss Jimmy Wilson has dismissed suggestions that the era of multi-billion-dollar greenfields iron projects in the Pilbara has come to an end, even as the mining giant focuses on extracting efficiencies rather than building new mines.

Mr Wilson also refused to be drawn into forecasting the iron ore price amid fears it could tumble in response to patchy Chinese economic data. He said few ¬people had any idea about the outlook for Australia’s most valuable export commodity.

Speaking at the opening of BHP’s $US3.6 billion ($3.9bn) Jimblebar mine near the town of Newman, Mr Wilson said he and his team had “impressed ourselves” by boosting production forecasts from its West Australian operations from 207 million ¬tonnes per annum to 217mtpa for this financial year.

The improved outlook had been achieved through operational improvements, productivity gains and technological innovation rather than any major capital spending. But Mr Wilson rejected suggestions that Jimblebar, along with Gina Rinehart’s $10bn Roy Hill project, could be the last greenfields mines of the Pilbara iron ore boom.

He said the reluctance by miners to allocate billions of dollars towards new mines was driven by the fact that Chinese raw steel production had slumped from a growth rate of 24 per cent almost a decade ago to as low as 3.4 per cent in coming years.

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