From Mining Magnates To Beef Barons, The New Focus For Two Australian Billionaires – by Tim Treadgold (Forbes Magazine – July 17, 2014)

http://www.forbes.com/

One billionaire adding beef cattle to their mining interests is a curiosity. Two is a stampede.

In Australia, that’s just what has happened with the country’s richest person, Gina Rinehart, spending an estimate $40 million to buy a half share in two cattle-breeding properties covering 1.1 million acres of the Kimberley region in the country’s north.

Rinehart is following in the footsteps of Andrew Forrest, one of her rivals in the iron ore business, who invested an estimated $30 million in May to buy Harvey Beef which has extensive farming and processing interests in the south of Western Australia.

Both billionaires (Rinehart is worth an estimated $18.2 billion and Forrest $4.4 billion) have most of their fortunes tied up in the production of iron ore, the price of which has been falling thanks to its heavy dependence on demand for steel in China where a construction boom is slowing.

Fading Iron Ore Demand, Rising Food Demand

Neither Rinehart nor Forrest has described their move into farming ventures as a way of trimming their future exposure to iron ore, but that’s a reasonable interpretation thanks to the flattening outlook for iron ore demand.

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Rio Tinto Iron-Ore Output, Shipments Surged in First Half – by Rhiannon Hoyle (Wall Street Journal – July 16, 2014)

http://online.wsj.com/home-page

Production Rose 10%, While Shipments Increased 20%

SYDNEY— Rio Tinto RIO.LN -0.83% produced record volumes of iron ore in the first half of 2014, after expanding several vast mines in the Australian Outback even as prices of the steelmaking ingredient tumbled.

The results demonstrate how Rio Tinto is deepening its reliance on a commodity used in things as diverse as cars and apartment blocks for profit, despite concerns among some investors that global mining companies are adding new supply too quickly. Several fund managers recently cut their holdings of mining shares, including Rio Tinto’s stock, amid worries about a looming supply glut of iron ore that could take years to clear.

Meanwhile, Fortescue Metals Group Ltd. said Wednesday that it expects to ship as much as 29% more iron ore to buyers in countries such as China over the coming year after completing an expansion of its Australian operations.

Fortescue, the world’s No. 4 iron-ore mining company, has grown over the past decade from a tiny explorer, competing against resource titans such as Rio Tinto and BHP Billiton. BHP.AU -0.42% It recently reached a long-targeted annual output rate of 155 million tons after building new mines in the resource-rich Pilbara region of Western Australia state.

Rio Tinto said Wednesday that it produced 139.5 million metric tons of iron ore in the first half, up 10% from a year earlier. Its shipments rose 20% to 142.4 million tons.

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UPDATE 1-Iron ore at 7-week high, closes in on $100 as steel strengthens – by Manolo Serapio Jr (Reuters India – July 15, 2014)

http://in.reuters.com/

SINGAPORE, July 15 (Reuters) – Iron ore climbed to its highest level in almost seven weeks, moving closer to $100 a tonne, as firmer steel prices in top market China spurred buying interest in the raw material.

China’s bid to push infrastructure spending to boost its economy lifted steel futures in Shanghai on Tuesday to their highest since late May. That has helped increase purchases of spot iron ore cargoes, raising chances that prices will bounce back to $100 per tonne after falling nearly 30 percent this year.

Iron ore has risen 10 percent since dropping to a 21-month low of $89 in mid-June, so far the trough this year for prices that dropped below the $100 support level in May.

Benchmark 62-percent grade iron ore for immediate delivery to China .IO62-CNI=SI rose 1 percent to $97.90 a tonne on Monday, the highest since May 27, based on data compiled by Steel Index.

“There’s a chance that the momentum can be sustained because steel prices are moving up. Definitely the government is going to help infrastructure spending and that should lend more support to steel prices, and also iron ore,” said a trader in Shanghai.

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Mine-impacted Nunavut hamlets eligible for QIA funding – by David Murphy (Nunatsiaqonline.com – July 11, 2014)

http://www.nunatsiaqonline.ca/

“We want to make sure that the families in the communities are supported”

The Qikiqtani Inuit Association plans to give away $750,000 to communities affected by the Mary River iron mine every year for the next six years.

QIA on July 9 launched its Ilagiiktunut Fund, which intends to offset potential social, economic and cultural impacts of the Mary River iron mine in five North Baffin communities.

Various bodies, such as hamlet councils, committees, groups, and even individuals in Arctic Bay, Clyde River, Hall Beach, Igloolik and Pond Inlet may apply for funding for projects of their choosing.

“750,000 for five communities is a lot of money,” Okalik Eegeesiak, president of QIA, said when she announced the fund on Nunavut Day. The Ilagiiktunut Fund replenishes to $750,000 every year, with QIA and Baffinland Iron Mines Corp. each contributing $375,000. Eegeesiak said the fund is essential for those working at the mine and their families.

“Because in a mining operation there’s at least a two-week-in, two-week-out period where staff work at the mine site, leaving the families behind,” Eegeesiak said.

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Five hours’ flying time winds clock back to the beginning – by Paul Garvey (The Australian – July 10, 2014)

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

THE economic growth of China in the past decade has generated tens of billions of dollars in profits for Australia’s mining companies, but it was all about Japan in the heart of the company’s Pilbara iron ore operations yesterday.

Shinzo Abe made a flying two-hour visit to the West Angelas mine in the remote pocket of Western Australia, following through on an invitation made by Rio Tinto chief executive Sam Walsh in Tokyo last year.

The five-hour journey across the country from Canberra to the Pilbara left its mark on Mr Abe, giving him more time to talk with Tony Abbott.

“I was extremely impressed that I could take a five-hour flight and still be in Australia. I’m really amazed by how big this country is,” he said through an interpreter, addressing a gathering on the edge of the gaping West Angelas open-pit as huge trucks rumbled past hauling iron ore bound for Asia.

“The flight took twice as long as the summit meeting we had yesterday, but I actually believe that we had deeper discussions on the flight and we will really be able to deepen our relationship as well.”

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Australia’s big three miners look to tighten their iron grip – by Jamie Smyth (Financial Times – July 8, 2014)

 

http://www.ft.com/intl/companies/mining

Port Hedland – The man who made a US$10bn bet on the global iron ore market is predicting Australia’s big three miners will tighten their grip on the global industry over the next few years as higher cost producers fall victim to lower iron ore prices.

Andrew “Twiggy” Forrest, founder and chairman of Fortescue Metals Group, says the sharp fall in iron ore prices since the start of the year is causing some smaller Australian producers and overseas competitors to exit the industry.

“Because you have incredibly low operating costs with the big Australian producers we are seeing more substitution take place from China and India as competitors switch off production,” says Mr Forrest, who owns one-third of Fortescue shares.

“The wholesale shutting down of iron ore production industries basically happens in other countries. The Pilbara [in Western Australia] has always been historically the big player.”

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NEWS RELEASE: BHP BILLITON SHIPS ONE BILLION TONNES OF IRON ORE TO JAPAN – July 2, 2014

 

BHP Billiton today celebrated the shipment of its one billionth tonne of iron ore to Japan with customers, joint venture participants and employees in Port Hedland, Western Australia.

BHP Billiton President Iron Ore Jimmy Wilson and BHP Billiton President HSE, Marketing and Technology Mike Henry were joined by joint venture participants ITOCHU Corporation (ITOCHU) and Mitsui & Co., Ltd (Mitsui) to mark the milestone in front of the Saiko bound for Japan.

Mr Henry acknowledged Japan’s industrial transformation and the importance of two-way trade in driving economic growth.

“In the late 1960s and through the 1970s, Japan grew to become an economic powerhouse through its expertise in steel manufacturing, heavy industry, technology and electronics,” he said.

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Can mining companies survive US$90/t iron ore prices? – by Dorothy Kosich (Mineweb.com – July 4, 2014)

http://www.mineweb.com/

If iron ore prices continue at near-record lows, mining companies with substantial debt or expensive operations may “bear the brunt of the impact”, S&P warns.

RENO (MINEWEB) – If iron ore prices “stagnate” at US$90 per ton through 2015, some miners’ key credit metrics might worsen significantly, based on scenario analysis on 10 major iron ore producers, Standard & Poor’s Ratings Services observed this week.

“In particular, miners with large iron ore exposure, but are unable to cut costs and are saddled with debt, will face a severe deterioration in earnings and credit metrics,” warned S&P Credit Analysts May Zhong, Diego H. Ocampo, Andrey Nikolaev, Amanda Buckland, Elad Jelasko, and Xavier Jean.

“Whether this deterioration triggers a downgrade depends critically on a mining company’s financial flexibility. If a miner can defer its capital expenditure and conserve cash, its credit quality should be able to withstand sliding iron ore prices,” said the analysts. “In addition, diversified mining companies are well placed, as they can rely on commodities with more resilient prices, such as oil.”

“Another important factor is the movement of mining companies’ local currencies, which could affect their costs and revenues,” S&P observed.

“We observed that major players – Australia’s BHP Billiton Ltd. and Rio Tinto, PLC, and Brazil’s Vale S.A, – can accommodate declining earnings should iron ore prices stay at US$90 per ton through to the end of 2015,” said the credit ratings agency.

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Iron failings [Labrador Trough] – Editorial (St. John’s Telegram – July 04, 2014)

http://www.thetelegram.com/

The Labrador Trough may have seen a feeding frenzy in its day, but the herd seems to be thinning. Lured by cheaper iron from competitive sources, customers have been moving on to greener pastures.

The latest victim: Labrador Iron Mines, which announced Wednesday it’s suspending operations on both sides of the Labrador-Quebec border.

Over the past financial year, the company lost $105.2 million, compared to a net loss of $129.7 million a year ago. It said 2014 will be a “development year” as it concentrates its efforts on its Houston Mine, located near Schefferville in northern Quebec. That project is slated to begin production in April 2015.

In February, Cliffs Natural Resources announced it was idling its operations in Wabush indefinitely, leaving 400 employees out of work. But optimism still springs eternal among government and industry officials.

Two days after the February closure, Premier Tom Marshall was in Wabush announcing that Newfoundland and Labrador Hydro had been instructed to forge ahead with a third line to supply power from Churchill Falls to Labrador West.

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UPDATE 2-India’s Sesa sees 6-fold jump in iron ore output, Goa mining set to resume – by Krishna N Das (Reuters India – July 3, 2014)

http://in.reuters.com/

NEW DELHI, July 3 (Reuters) – India’s Sesa Sterlite Ltd expects its iron ore output to surge six fold this fiscal year as it resumes production in Goa in September after a 19-month mining ban in the state, an executive of the country’s top private iron ore miner said.

A pick up in production as mines in India’s biggest iron ore-exporting state restart could hurt global prices of the steelmaking raw material .IO62-CNI=SI that have already lost almost 30 percent this year in an amply supplied world market.

Sesa Sterlite’s total iron ore output from India, where it operates in Goa and neighbouring Karnataka, is expected to reach 9.29 million tonnes in the year to March 2015 from about 1.5 million a year ago, Aniruddha Joshi, a vice president at the firm, told Reuters in an interview on Thursday.

Most of the output will be exported as Indian steelmakers are not keen on buying the low-grade ore from Goa at global benchmark prices, Joshi said. The country is currently the world’s tenth largest exporter of iron ore.

“It’ll suffice to say that only China can use Goan ore,” Joshi said. “Because it’s hematite coarse fines which can be mixed with very fine concentrates that are only produced in China in high quantities.”

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Labrador Iron halts mines amid steel-industry slump – by Bertrand Marotte (Globe and Mail – July 3, 2014)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

MONTREAL — Labrador Iron Mines Holdings Ltd. said it is halting all operations at its mines for the rest of the year, the latest industry player to fall victim to slumping demand.

The benchmark price of iron ore, used to make steel, has plummeted 30 per cent this year on rising global supply and reduced steel output in the critical Chinese market. The spot price is in the $93 (U.S.)-a-tonne range, down from almost $120 in early April, a level at which high-cost producers such as Labrador Iron can barely meet their costs. Some observers see the price falling to below $80.

Labrador Iron is experiencing “considerable strain” on its cash resources and now needs outside investment if it is to continue operations, the company’s chairman and chief executive officer John Kearney said.

Across-the-board cost-cutting measures are in place and Labrador Iron is in talks for potential financing with commodity traders, financial institutions and others, the company said. The focus for 2014 is development of the flagship, long-life Houston Mine in the Labrador Trough, it said.

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Labrador Iron Mines suspends operations amid falling ore prices, high costs – by Canadian Press (St.John’s Telegram – July 2, 2014)

http://www.thetelegram.com/

Labrador Iron Mines Holdings Ltd. says it has suspended all operations at its mines for the year, due to the low price of iron ore and a refocus by the company to cut costs.

The company said 2014 will be a “development year” as it concentrates its efforts on developing its Houston Mine, located near Schefferville in northern Quebec. The project is slated to begin production in April 2015, pending the completion of financing.

Labrador Iron said it is also looking to lower costs by renegotiating with major contractors and suppliers, and has already put in place savings initiatives in various areas including mining equipment rates, rail car leasing rates and corporate and administration costs.

It said it has enough cash to continue operations over the next year, but is looking to obtain financing if the price of iron ore continues to decline.

“However, there are no assurances that LIM will be successful in obtaining any required financing, or in obtaining financing on a timely basis or on reasonable or acceptable terms and, as part of this process,” it warned in a statement.

“If LIM is unable to obtain adequate additional financing on a timely basis, the company would be required to curtail all operations and development activities.”

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RPT-COLUMN-China’s iron ore mines won’t shut fast enough to offset global supply boost – by Clyde Russell (Reuters India – July 1, 2014)

http://in.reuters.com/

LAUNCESTON, Australia, July 1 (Reuters) – Iron ore prices rose the most in 10 months last week, but hopes that this marks the start of a new bullish phase are likely to be dashed.

Spot Asian iron ore .IO62-CNI=SI ended last week at $94.90 a tonne, a gain of 3 percent from the prior week, with prices bolstered by an improvement in the outlook for manufacturing in China following the June HSBC flash Purchasing Managers’ Index showing expansion for the first time in six months.

Iron ore prices are still down 30 percent from the $134.20 a tonne at the end of 2013, but they have recovered since briefly dropping to a 21-month low of $89 on June 16.

The bullish case for a recovery is largely based on expectations that Chinese domestic production will drop as high-cost mines are forced to close on unsustainable losses. The loss of domestic output will open the door to increased imports, thus absorbing the extra supply being brought online by the major mining houses.

This view is bolstered by the improving outlook for steel demand on the back of faster investment in railway and other infrastructure spending as the authorities undertake what’s been characterised by several analysts as a “mini-stimulus” to ensure economic growth remains above 7 percent per annum.

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UPDATE 2-Australia cuts 2015 iron ore, met coal price forecasts – by James Regan (Reuters India – June 25, 2014)

http://in.reuters.com/

SYDNEY, June 25 (Reuters) – Australia revised down its 2015 iron ore and metallurgical coal price forecasts as rising output of two of the country’s biggest export earners outstrips demand, raising concerns for mining companies already struggling with shrinking profit margins.

Robust growth in export tonnages meant Australia would still post an 11 percent rise in total export earnings for mineral and energy comodities in 2013-14, the Bureau of Resource and Energy Economics (BREE) said in a quarterly update.

Analysts warn, though, that Australia’s powerful mining industry is facing a prolonged stretch where commodities will fetch prices well below those of the now-defunct mining boom years. BREE lowered its price forecast for iron ore to an average $94.60 a tonne in 2015 from a previous forecast of $100.80, citing growing competition to sell into China’s steel market.

Although steel production in China is forecast to increase in 2015, competition among iron ore exporters to sell their additional production is expected to intensify, it said, while a strong Australian dollar would also drag on local miners.

“This will draw a sharp focus towards managing costs and enhancing productivity in the sector,” said Wayne Calder, deputy executive director of BREE.

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BHP looks to cut thousands of jobs from its iron ore division in WA – by Graeme Powell (Australian Broadcasting Corporation – June 24, 2014)

http://www.abc.net.au/

Mining company BHP Billiton is looking at cutting thousands of jobs from its iron ore operations in WA. The miner has already announced the loss of 500 jobs in recent months, including 100 at its headquarters in Perth.

The ABC understands up to 3,000 jobs could go from BHP’s iron ore division, which currently employs 16,000 people. A BHP spokeswoman said external consultants have been employed to conduct a review in order to cut costs.

The ABC understands many of the jobs losses will involve contractors whose positions are coming to an end and their contracts will not be renewed.

BHP says it has been open about the review and holds regular meeting with workers to keep them updated. The spokeswoman says the job cuts are necessary to ensure BHP Billiton remains a competitive, world-class operation.

In a statement released to the ABC this morning, BHP defended the proposed job cuts. “BHP Billiton Iron Ore regularly undertakes improvement initiatives and organisational reviews. We have engaged external consultants to assist with this process.

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