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Iron Ore

Vale Stares At $1 Billion Investment Loss If Guinea Panel Recommendation Implemented (Forbes Magazine – March 12, 2014)

http://www.forbes.com/

Vale might find $1 billion in investments at the Simandou iron ore deposit wiped out if the Guinean government accepts and implements the recommendations of a technical committee. This committee had been set up to review mining concessions awarded under previous administrations.

It has recommended that Vale and its partner BSGR should be stripped of the rights to exploit Simandou because BSGR obtained the concession allegedly through corruption. The committee wants the tendering process for the northern part of Simandou to be conducted again. The committee will submit its recommendations to a strategic committee which will take a final decision.

If the recommendations are accepted, Vale’s investments worth $1 billion will have to be written off. It is not clear whether the company will be compensated for the amount it has already paid to BSGR for acquiring a 51% stake in northern Simandou in the first place. A re-tendering process will also witness Vale’s competitors like Rio Tinto and BHP Billiton competing for the deposit.

However, a more immediate concern would be the possibility of international arbitration because BSGR has threatened to take this route if stripped of its ownership. This would mean a lengthy and protracted legal battle which will simply delay progress with mining the disputed deposit.

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REFILE-Lower iron ore prices here to stay – Citi – by James Regan (Reuters U.S. – March 11, 2014)

http://www.reuters.com/

(Reuters) – Iron ore prices are set to remain at lower levels given increased supplies of the steel-making ingredient, although the speed of their recent slump has taken the market by surprise, Citigroup said on Tuesday.

Spot iron ore prices posted their biggest one-day fall in more than four years on Monday after China’s trade balance swung into deficit and amplified fears of a slowdown in the world’s second-biggest economy.

“The broad move lower is here to stay,” Ivan Szpakowski, commodities strategist at Citi Research, said at an iron and steel conference in Perth.

“Prices are moving on a cyclical basis due to the increase in supply. The question had been the timing of it, and the rapidity of the fall, that’s something that had not been expected,” Szpakowski said. Iron ore for immediate delivery to China .IO62-CNI=SI fell 8.3 percent, its largest one-day percentage fall in 4-1/2 years, to $104.70 a tonne, its weakest since October 2012, according to data compiled by The Steel Index.

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Andrew ‘Twiggy’ Forrest takes billion-dollar hit as iron ore tumbles – by James Thomson (Sydney Morning Herald – March 10, 2014)

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

Andrew ‘Twiggy’ Forrest knows better than most how movements in commodity prices can cause havoc with your bank balance. With iron ore prices falling to its lowest in close to a year, shares in Fortescue Metals Group tumbled 8.38 per cent to $4.98 in initial trade on Monday morning, wiping around $500 million off the value of Forrest’s stake.

Since February 21, when FMG’s shares broke through $6 for the first time since early 2012, the stock has dropped by almost 15 per cent, broadly in line with the fall in the iron ore price. That drop has wiped around $1.3 billion off the value of Forrest’s stake in a matter of 11 trading days. His stake is now worth $5.1 billion.

Calculating the impact of the iron ore price movement on other iron ore moguls such as Gina Rinehart and Angela Bennett isn’t as transparent, although given they both rely on royalties paid by Rio Tinto – which mines tenements owned by their fathers, Lang Hancock and Peter Wright – the share price of that company can be seen as a very rough proxy.

In morning trade, Rio shares dipped 4.23 per cent to $62.19. Since February 21, Rio’s stock is down 11.4 per cent. BHP Billiton shares lost 3.15 per cent this morning, to $36.53. The stock is down 6.7 per cent since February 21.

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RPT-UPDATE 1-Panel says Guinea should strip BSGR, Vale of rights to iron deposit – by Silvia Antonioli, David Rohde and Saliou Samb (Reuters India – March 10, 2014)

http://in.reuters.com/

LONDON/CONAKRY, March 7 (Reuters) – A technical committee in Guinea has recommended the government strip BSG Resources (BSGR) and its partner Vale of the rights to exploit a giant iron ore deposit because the panel alleges BSGR obtained the concession through corruption, sources close to the matter said.

The latest development in a saga surrounding one of the world’s largest mining deposits casts uncertainty over the future of the sought-after Simandou, a mine that could help one of Africa’s poorest countries to prosper.

It also raises concerns over the position of Brazilian miner Vale, which, according to a source close to the company, has spent more than $1 billion in its Guinean venture and risks seeing its investment and efforts wiped away.

BSGR vigorously denied the allegations of wrongdoing and said it believes the committee’s procedure is part of a predetermined and orchestrated plan to expropriate the company’s mining rights.

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New Cliffs CEO visits Iron Range, predicts stable times for taconite – by John Myers (Duluth News Tribune – March 6, 2014)

http://www.duluthnewstribune.com/

VIRGINIA — In his first 100 days on the job, Gary Halverson closed Canada’s third largest iron ore mine, halted a chromite mining project in Ontario and worked to fend off a Wall Street demand that his company split up.

Other than that, it was mostly uneventful for the new president and chief executive officer of Cliffs Natural Resources.

Halverson spent Thursday on the Iron Range, where his company operates three of Minnesota’s six major taconite iron ore operations, saying his company is “shrinking to grow’’ but predicting a good year for its part of the state’s taconite industry.

Halverson, speaking to Iron Range business and community leaders, said he expects U.S. automakers to build 16.5 million vehicles in 2014, 1 million more than 2013; that new construction should increase 6 to 8 percent this year; and that U.S. steel demand should increase 4 percent this year over last, creating a good market for his company’s taconite iron ore.

“We’re about back to full production at NorthShore (mining) and we expect to produce between 22 and 23 million tons of pellets this year’’ at U.S. operations, Halverson said, noting that’s up from 21 million tons in 2013.

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Skurla study’s ‘mining boom’ would be due almost entirely to taconite – by Marshall Helmberger (MinnPost.com – March 6, 2014)

http://www.minnpost.com/

The following column was originally published in the Timberjay newspapers of Ely, Tower-Soudan and Cook-Orr. For more than three years, advocates for copper-nickel mining have pointed to the study produced by Jim Skurla, of the Labovitz School of Business at the University of Minnesota-Duluth, as a key justification for moving forward with this new type of mining.

The study, first released in 2009 and updated in 2012, touted huge impacts from planned new mining projects, in terms of jobs and new tax revenue to the state and local areas.

We’ve all heard the numbers from Skurla’s report cited by mining proponents — as many as 5,000 new jobs in what they term the “strategic mining sector” if all the proposed projects move forward as planned. To supporters, such numbers portend an economic renaissance for our region.

While some economists have taken issue with Skurla’s report, I don’t have any reason to believe that his conclusions are in error, at least within the context of economic modeling in general, which is typically about as accurate as your average weather forecast. The bigger concern, in my mind, is that his conclusions are widely misunderstood.

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UPDATE 3-Vale vows spending austerity as metals price outlook improves – by Jeb Blount and Guillermo Parra-Bernal (Reuters U.S. – February 28, 2014)

http://www.reuters.com/

RIO DE JANEIRO/SAO PAULO Feb 27 (Reuters) – Vale SA , the world’s largest iron ore producer, will continue reining in costs this year even as the outlook for prices and sales volumes is improving, its chief executive officer said on Thursday.

“We plan to continue with austerity,” Murilo Ferreira, the company’s CEO told investors at a conference call to discuss fourth-quarter earnings.

The company will also continue efforts to sell underperforming units and control investments as it sharpens its business focus on iron ore, responsible for about three-quarters of revenue and nearly all of its profit.

His remarks come as Vale reported a net loss of $6.45 billion in the quarter, its largest since Brazil’s government sold control to investors in 1997 and more than twice the shortfall of the year-earlier period. The loss was due to non-recurring events such as a one-time income tax settlement and the write-off of an abandoned potash project in Argentina.

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Vale Rallies as Chinese-Led Iron Ore Demand Boosts Earnings – by Juan Pablo Spinetto (Bloomberg News – February 27, 2014)

http://www.bloomberg.com/

Vale SA (VALE), the world’s largest iron-ore producer, rallied the most in three weeks after fourth-quarter earnings before taxes and other items beat estimates on rising prices for the steel-making material.

Vale rose as much as 2.7 percent to 29.81 reais in Sao Paulo today, the most intraday since Feb. 6, before closing at 29.31 reais. The gain pared its loss this year to 10 percent. The benchmark Ibovespa index of Brazilian shares rose 2.2 percent.

The world’s third-largest mining company is increasing cash generation after Asian-led demand pushed up average iron-ore prices 12 percent in the fourth quarter. While iron ore declined this quarter because of rising supplies and monetary constraints in China, it will remain at profitable levels for Vale for a sustained period of time, Executive Director for Ferrous and Strategy Jose Carlos Martins said.

“The price will continue to be very favorable and very profitable for Vale,” Martins told analysts on an earnings conference call today. “There is a very strong resistance in price in the range of local Chinese iron-ore costs.”

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UPDATE 1-Australia’s Rinehart nears $7.8 bln mine finance deal – sources – by Sharon Klyne, Joyce Lee and Prakash Chakravarti (Reuters India – February 26, 2014)

http://in.reuters.com/

Feb 26 (Reuters) – Australian billionaire Gina Rinehart’s Roy Hill iron ore project is close to finalising a $7.8 billion financing deal, sources said, a vital step towards an end-2015 start for the giant mine in Western Australia’s iron-rich Pilbara district.

The 55-million tonnes-a-year project, which would make Roy Hill Australia’s fourth-largest iron ore producer, will add to hefty new supplies coming on line from Rio Tinto, BHP Billiton and Fortescue Metals Group.

It could also add to the wealth of mining magnate Rinehart, already Australia’s richest person with a $17.7 billion fortune, according to Forbes. Roy Hill is likely, however, to be the last new project of this scale to get off the ground, given worries over shaky underlying demand for iron ore in China, the world’s biggest consumer of the steel-making raw material.

Other miners are rethinking expansion and cutting costs as iron ore prices drop. At just below $120 a tonne .IO62-CNI=SI on Wednesday, prices have fallen more than 11 percent so far this year and are down almost 40 percent from a record high of $200 reached in February 2011.

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First cartels, now vigilantes target Mexico mines – by Agence France-Presse (Global Post – February 25, 2014)

http://www.globalpost.com/

Dozens of trucks carry iron ore out of a mine in western Mexico, spinning dust into the air as they barrel past a guard booth peppered with scores of bullet holes.

The pockmarks are the scars of darker days, when the mine in the town of Aguililla, Michoacan state, was under the yoke of the Knights Templar drug cartel, which extorted the business.

The gang was chased out of town, but the mine still has to pay outsiders. The mine now forks out “compensation” to a vigilante movement which celebrated on Monday the first anniversary of a revolt that has driven the gang out of Aguililla and around 20 other towns in Michoacan.

The civilian militias say the mines are helping to finance their cause against the cult-like cartel which was deeply entrenched in Michoacan’s economy and terrorized the community through extortion, kidnappings and murder. Farmers and ranchers are also making donations to the militias that have liberated their towns.

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Ministers on the ground in Wabush – by Ty Dunham (St. John’s Telegram – February 18, 2014)

http://www.thetelegram.com/

Government pledges to help displaced workers transition into new jobs

Displaced mine workers in Wabush have been offered help from the provincial government with apprenticeship and worker development programs.

Approximately 400 mine employees have been worried about the future ever since Cliffs Natural Resources announced last week that the Wabush Scully Iron Ore Mine was being idled.

Advanced Education and Skills Minister Kevin O’Brien said his department has a range of programs for those affected. “We can train people not currently trained. We understand there is a highly skilled workforce at Wabush Mines as well,” he said.

Last week, Premier Tom Marshall said cabinet ministers will visit Labrador West regularly to work with the communities to help with the transition. Ministers have met with union officials, municipal leaders and companies to identify opportunities for skilled workers as quickly as possible.

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NEWS RELEASE: CLIFFS NATURAL RESOURCES INC. ISSUES OPEN LETTER TO SHAREHOLDERS

CLEVELAND – Feb. 14, 2014 – Cliffs Natural Resources Inc. (NYSE: CLF) (Paris: CLF) today issued the following open letter to all shareholders:

Dear Cliffs Shareholder:

Our Board and management team are fully committed to pursuing a course that enhances long-term shareholder value – and we want to accomplish it in a manner that is sustainable and that will benefit all of our shareholders.

As we do with any significant investor, Cliffs’ Board of Directors and management team have attempted to maintain a constructive dialogue with Casablanca. In fact, Cliffs’ Chairman along with senior management has met with Casablanca in person twice in addition to a number of telephone calls and emails. Also, one of the Company’s financial advisors, along with members of senior management, participated in a discussion with Casablanca regarding its proposal and analysis of Cliffs. We are disappointed that Casablanca seems intent on waging a public campaign rather than continuing its private engagement with our Chairman and management to address our doubts and concerns relating to Casablanca’s proposal.

Since July 2013, Cliffs has instituted a number of changes to our Board and senior management team. These changes included the addition of four highly qualified directors:

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Cliffs cutting jobs, costs – by Star Staff (Sudbury Star – February 14, 2014)

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

U.S.-based Cliffs Natural Resources, which once had ambitious plans to open a chromite smelter in Sudbury by 2015, has announced that it will lay off about 500 employees and dramatically reduce spending.

“Sharper capital allocation must drive our decisions,” CEO Gary Halverson said in a statement. “(The) announcement to reduce overall capital spending is an important first step.”

However, on Thursday, Cliffs, which is facing against an activist investor who wants to break up the mining company, reported higher fourth-quarter profits helped in part by higher iron ore prices and a drop in the cost of goods sold.

The iron ore and metallurgical coal producer said net income rose to US $31 million, or 20 cents a share, in the three months to end-December. A year ago, it reported a loss of $1.6 billion, or $11.36 a share, when it wrote down $1 billion related to its 2011 acquisition of Consolidated Thompson Iron Mines Ltd.

Revenue was marginally lower at $1.52 billion in the quarter from $1.54 billion as lower prices and sales for coal were partially offset by a 10 percent increase in global seaborne iron ore pricing.

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UPDATE: 500 workers affected as Wabush Mines idled (St. John’s Telegram – February 11, 2014)

http://www.thetelegram.com/

Cliffs Natural Resources is shutting down production at Wabush Mines, affecting 500 workers currently employed there.

The news was confirmed in an official statement by the company. The statement was not specific to the status of Wabush Mines, but instead focused on a more than 50 per cent slash in the company’s capital spending across its business year over year.

Premier Tom Marshall has issued a statement in response to the news. “The decision by Cliffs Natural Resources to idle its mining and processing operations at the Scully Iron Ore Mine in Wabush is very disappointing. While we believe this was undoubtedly a difficult decision for Cliffs, our thoughts are with employees of the mine and their families during this challenging time,” Marshall said.

“I will be in Wabush this week with Ministers Dalley and McGrath for discussions with stakeholders. We will continue to further opportunities for development in Labrador West. We remain confident in the future of the mining industry in the region.”

Wabush Mines started pulling ore from the Scully Mine in 1965. The ore goes to a concentrating plant at site and is then moved, by rail, to Point Noire, Que.

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NEWS RELEASE: Cliffs Natural Resources Inc. Responds to Casablanca Capital

CLEVELAND – Feb. 12, 2014 – Cliffs Natural Resources Inc. (NYSE: CLF) (Paris: CLF) today issued the following statement in response to Casablanca Capital:

The Board of Directors and management team of Cliffs Natural Resources welcome open communications with all of our shareholders and value their input toward the collective goal of enhancing shareholder value. As part of the goal to enhance shareholder value, over the last year, the Cliffs Board and management team have taken significant steps to improve Cliffs’ financial and operating performance across all businesses.

The Company’s focus has been – and continues to be – on reducing costs, strengthening its balance sheet with cash flow from operations, taking a disciplined approach to capital spending, and evaluating the strategic fit and value creation potential of all the Company’s assets. In addition, Cliffs has made significant changes to strengthen the Board of Directors and management team, including the addition of four new Board members, a new Chairman and Gary Halverson as the incoming Chief Executive Officer.

Consistent with its focus on enhancing shareholder value, on Feb. 11, 2014 the Company announced that it expects full-year 2014 capital expenditures to be between $375 – $425 million, a reduction of more than 50% from full-year 2013 capital spending. This decrease is driven by a significant reduction in the Company’s expansion and capital spending at the Bloom Lake Mine. Given the wide range of outlook for iron ore prices, the Company decided to reduce 2014 capital expenditures at Bloom Lake as it considers strategic alternatives for the asset.

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