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Iron Ore

UPDATE 2-Vale profit dives on FX charge; cost-cutting continues – by Jeb Blount (Reuters U.S. – August 7, 2013)

 http://www.reuters.com/

RIO DE JANEIRO, Aug 7 (Reuters) – Brazilian miner Vale SA said on Wednesday its second-quarter profit plunged after the company recorded a surprise $2.78 billion in foreign exchange losses on currency derivatives and debt, one of its worst bottom-line results in a decade.

In the three months ending June 30, net income fell 84 percent to $424 million, compared with a profit of $2.6 billion in the year-ago quarter, Vale said in a statement. The result was below market expectations. The average estimate of 18 analysts surveyed by Reuters was for profit to fall 7.63 percent to $2.46 billion.

Vale said the losses resulted from extraordinary, one-time, non-cash, financial charges that do not reflect its improved operational results. The Rio de Janeiro-based company is the world’s largest iron ore producer, No. 2 nickel miner, and a major producer of copper and fertilizers.

While a stronger dollar led to financial losses and lower profit, it also helped Chief Executive Murilo Ferreira to cut $736 million from the cost of salaries, research, equipment, construction and other goods and services.

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Three bidders out as Rio faces lackluster Canadian sale: sources – by Anjuli Davies and Clara Ferreira-Marques (Reuters U.S. – August 6, 2013)

http://www.reuters.com/

LONDON – (Reuters) – Three big-name bidders for Rio Tinto’s (RIO.L) majority stake in Canada’s largest iron ore producer are now out of the running, sources familiar with the talks said on Tuesday, after offers came in well below the mining group’s targets.

The sources said private equity firm Apollo, which had been working with Canadian pension fund CPPIB, rival Blackstone (BX.N) and commodity trader and miner Glencore (GLEN.L) were no longer in the race after a second round of bids last month. The low offers, at a time when dozens of mining assets are for sale and demand for steelmaking commodities is uncertain, raise questions over the future of a sale that could still take months to tie up – should Rio decide to push ahead.

Rio has a handful of assets on the block as it battles to cut a $19 billion debt burden and meet cost cutting targets. Like other miners seeking to divest unwanted activities, however, it has found buyers unwilling to pay up and in June was forced to scrap the sale of its $1.3 billion diamond business, 15 months after it was first announced.

Rio appointed banks to sell its 59 percent stake in Iron Ore Company of Canada (IOC) earlier this year after deciding to focus its iron ore efforts on assets in Australia’s Pilbara region, where the world’s second-largest iron ore producer has lower costs and higher grades.

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Building facilities, building a work force, building a mine – by Anna Kurth (Hibbing Daily Tribune – July 30, 2013)

http://www.virginiamn.com/

Essar Steel Minnesota’s place in iron industry secure

NASHWAUK — For officials at Essar Steel, mining in Minnesota is all about location. Locating on the Iron Range provides immediate access to the rail lines and utilities necessary to mine and transport their product and employees with the skills they’re seeking.

Building a new plant also provides the advantage of mining next door to the facility, which allows Essar Steel to be in the first-quartile of low-cost producers, said Ken Kinsey, chief of operations. A large portion of mining costs come from mining operations — equipment and employees, he said. Essar Steel will start operations needing less of both.

Other mines first built their primary crusher right on the doorstep of the mine. But during decades of mining, operations have migrated and haul distances have increased. Now Essar will benefit from mining on its crusher’s doorstep.

“We’ve put our plant on the north side of the ore body so it doesn’t encumber any iron ore resources,” Kinsey said, adding that the plant is positioned so mining will start where stripping is lowest.

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Quebec eyes partnership on Nunavik iron mine project – by Jane George (Nunatsiaq News – July 29, 2013)

http://www.nunatsiaqonline.ca/

“We are very pleased to announce that the Ministry of Finance and Economy of the Government of Quebec has confirmed its interest”

Quebec wants in on a huge Nunavik iron mine project. Quebec says it’s ready to invest money as a minority partner in the Hopes Advance iron mine project near the tiny Nunavik community of Aupaluk on Ungava Bay.

Oceanic Iron Ore Corp. said last week that it had received a Letter of Intent from the Quebec’s ministry of Finance and Economy about its interest in becoming a minority partner in the Hopes Advance project, subject to additional future approval of the Quebec government.

The money that Quebec wants to plow into the project comes from the province’s mining and oil capital fund with $750 million for investment in the non-renewable natural resources sector. That fund was announced in November 2012 in Quebec’s 2013-2014 budget speech.

“Oceanic views the Quebec Government’s LOI as a critical step in securing a senior strategic partner and in obtaining future financing for the project’s initial capital expenditures estimated at $ 2.85 billion,” an Oceanic news release said.

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NEWS RELEASE: “When is a mine not a mine?” – IOC – Rio Tinto & IOC’s illegal mining activities the subject of a new lawsuit filed by Canadian Aboriginal group

UASHAT MAK MANI-UTENAM, QC, July 30, 2013 /PRNewswire/ – The Innu First Nation of Uashat Mak Mani-utenam filed another lawsuit on July 22, 2013, this time in Federal Court, in regard to Rio Tinto’s IOC mining project (in addition to the CAD$900 suit filed on March 18, 2013). While IOC (majority-owned by Rio Tinto) continues to violate the Canadian Aboriginal group’s rights, destroy their environment and intrude on their territory, IOC has announced that the company seeks to open a whole new mine (called Wabush 3) next to their current project in Western Labrador.

Not only would such a new mine be a clear violation of the Aboriginal group’s constitutionally protected and internationally recognized indigenous rights but, in addition, IOC is attempting to avoid an environmental assessment and review of the new mine. The Innu First Nation of Uashat Mak Mani-utenam had no other choice therefore but to file another lawsuit respecting IOC’s activities to attempt to stop such undermining of Canadian environmental laws.

“IOC has clearly become a rogue entity. Not only is IOC the only mining operator on the Uashat Mak Mani-utenam traditional territory without an agreement with our people (4 other agreements with other mining companies), but here it is involved with flagrantly violating Canadian environmental law in an attempt to push their new project through at any cost,” stated Mike McKenzie, Chief of the Innu First Nation of Uashat Mak Mani-utenam.

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Teck said to bid for Rio’s stake in Iron Ore Co. of Canada – by Matthew Campbell, Brett Foley and Liezel Hill (Bloomberg/Montreal Gazette – June 29, 2013)

 http://www.montrealgazette.com/index.html

TORONTO, VANCOUVER and LONDON (England) — Teck Resources Ltd., Canada’s second-biggest mining company, is among the remaining bidders for Rio Tinto Group’s controlling stake in Iron Ore Co. of Canada, according to a person familiar with the situation.

Rio may decide to keep its Iron Ore Co. stake after being disappointed with the bids it’s received so far, said the person, who asked not to be identified because the talks are private. While London-based Rio has considered selling the unit’s mining and infrastructure assets separately, it decided against the plan, the person said. Spokesmen for Teck and Rio and a spokeswoman for Iron Ore Co. declined to comment.

Buying Canada’s largest iron-ore producer would enable Vancouver-based Teck to diversify its production, which mostly comprises coal, copper and zinc. Rio’s 59 per cent stake in Iron Ore Co. may fetch as much as $3.5 billion, Crédit Suisse Group AG analysts said in a note in June.

An acquisition that size would be Teck’s largest since its C$10.4 billion ($10.1 billion) purchase of Fording Canadian Coal Trust in 2008, a deal completed just as commodity prices were beginning to plunge during the financial crisis. In 2009, Teck’s credit rating was cut to junk by Standard & Poor’s and the company sold a 17 per cent stake to China Investment Corp.

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SA seventh-largest iron-ore producer – by Yolandi Booyens (MiningWeekly.com – July 26, 2013)

http://www.miningweekly.com/page/americas-home

South Africa’s position as the number three supplier of iron-ore to China emphasises the strategic importance of iron-ore deposits in the country and its importance as a significant iron-ore contributor worldwide, says minerals adviser Venmyn Deloitte MD Andy Clay.

He adds that this is testimony to the rapid historical development of South Africa’s iron-ore mines, in conjunction with the South African government’s infrastructure development.

South Africa is the seventh-largest producer of iron-ore and has also traditionally been the fourth-largest exporter worldwide. The country increased the percentage of iron it exports because of the suspension of mine operations in Goa, India, in September 2012 , owing to contraventions in terms of mining without licences or beyond licensed areas.

As a result, the global demand that Goa’s iron-ore mining operations used to meet can now be met by South Africa, in addition to other producers, such as Australia. “One of the factors that enables South Africa to export so much ore is the efficient Sishen iron-ore rail line,” notes Clay.

Opened in 1947, the Sishen mine is iron-ore supplier Kumba’s flagship operation and one of the largest openpit mines in the world. It has sufficient resources to sustain 21 years of production. It operates 24/7 and, in 2011, it transported 38.9-million tons of iron-ore.

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POSCO’s global expansion plan hits India roadblock – by Hyunjoo Jin (Reuters India – July 25, 2013)

http://in.reuters.com/

SEOUL – (Reuters) – Some investors in South Korean steelmaker POSCO are starting to sour on a long-delayed $12 billion project for a steel mill in Odisha that was once hailed as a profit driver.

The investment is part of a global expansion spree led by POSCO Group Chairman and Chief Executive Chung Joon-yang, a nearly decade-long strategy that was intended to capitalise on rapid emerging economy growth and help reduce the company’s reliance on its domestic market.

But a series of acquisitions left POSCO with a debt burden that has more than doubled over the past three years, while slowing growth in major markets such as China has hurt steel prices and margins. Last week, the steelmaker said it will bow out of a $5.3 billion steel mill development in Karnataka.

“The steel market is not in good shape, and we share investors’ concerns about the overall market conditions,” a POSCO executive told Reuters, speaking on condition of anonymity because he was not authorised to talk to the media. “The Odisha investment would be a burden to us.”

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Minor miners face major headache from iron ore giants – by James Regan (Reuters U.S. – July 21, 2013)

http://www.reuters.com/

SYDNEY, July 22 (Reuters) – From Africa to Australia, opportunities to develop small iron mines are fast disappearing, as cash dries up and miners are unable to compete with the crushingly low production costs of the sector’s heavyweights.

In Australia alone, a half a dozen or more projects pegged by prospectors in better times sit stranded in the outback with no timetable for development. Most are running short on money and have stripped payrolls and equipment spending to a bare minimum, awaiting a turnaround that forecasters predict is a long way off at best.

Companies such as Aquila Resources Ltd, Flinders Mines Ltd and Iron Road Ltd, which a year ago were leading a wave of new investment in iron ore, have had their stocks gutted as investors turned cold on their prospects.

“This is not the time to be developing a new iron ore mine, the big boys are making sure of that,” said Keith Goode, an analyst for Eagle Mining Research. Global miners Vale, BHP Billiton and Rio Tinto are increasing their supply dominance in the world’s second-biggest shipped commodity market after oil.

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Australia’s Waning Boom Saps Mining Area Housing Demand – by Nichola Saminather (Bloomberg News – July 21, 2013)

http://www.bloomberg.com/

After slashing the price of three planned townhouses by a third in the coal-mining town of Moranbah in remote northeastern Australia, agent Ricardo Baggio still can’t find buyers.

“No one’s got confidence,” said Baggio from broker Ray White Group’s Townsville franchise, about 550 kilometers (341 miles) north of Moranbah in Queensland state. “There are a few mines around the town but they’re not hiring or they’re downsizing.”

Home prices in Australia’s isolated mining towns, which outpaced increases in the rest of the nation over the past decade, are falling as companies such as Glencore Xstrata PLC (GLEN) and Peabody Energy Corp. (BTU) delay projects and lay off workers amid a slowing resources boom. The percentage of homeowners more than 30 days behind on their mortgage payments in Gladstone, a Queensland coastal town near more than $60 billion of gas projects, was 0.94 percent in March, according to Fitch Ratings, a 71 percent increase in six months.

The Moranbah townhouses, which will be built on a flat, sparsely landscaped street about 1 kilometer from the center of town, are on the market for A$525,000 ($478,485) each, down from an initial price of A$750,000, said Baggio. The median price of a home in Brisbane, the state capital, is A$425,000.

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Aperam is only firm bidder for Outokumpu Italian plant-sources – by Silvia Antonioli (Reuters U.S. – July 22, 2013)

http://www.reuters.com/

LONDON, July 22 (Reuters) – A consortium led by steelmaker Aperam has made the only binding offer so far for Finnish group Outokumpu’s stainless steel plant in Terni, Italy, two sources familiar with the matter said.

This contradicts previous reports of at least two binding offers, and highlights the limited interest so far in one of Europe’s biggest and most modern steel plants in an industry currently dogged by poor demand and weak prices.

Outokumpu has agreed to sell the Acciai Speciali Terni steel mill as a condition for securing the approval of European competition authorities for its purchase of Inoxum, the stainless steel arm of rival ThyssenKrupp.

Outokumpu has twice requested a postponing of the deadline to sell the plant because it thought bids were “unsatisfactory”.

Four parties expressed interest in acquiring the plant in the spring: U.S. private equity funds Apollo and JP Morgan’s One Equity Partners, the consortium led by Luxembourg-based Aperam with Italian steel companies Arvedi and Marcegaglia, and Chinese stainless steelmaker Tsingshan.

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COLUMN-BHP, Rio gamble on iron ore, but they’ve stacked the deck – by Clyde Russell (Reuters U.S. – July 18, 2013)

http://www.reuters.com/

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

LAUNCESTON, Australia, July 18 (Reuters) – Ramping up output in the face of an expected easing in demand growth may seem like an odd tactic for a miner, but it’s exactly what Rio Tinto and BHP Billiton are doing in iron ore.

The world’s second- and third-ranked producers both said this week that their expansion plans are on track, notwithstanding the expected slowdown in China, which buys about two-thirds of global seaborne iron ore supply.

But there is method in the seeming madness of increasing production when the demand outlook is less than rosy. Both Rio and BHP are effectively betting that their low-cost operations in Australia will be able to dominate the market, squeezing out both Chinese domestic production and higher-cost mines elsewhere in Australia and around the globe.

They are also betting that the fears of a slowdown in Chinese demand growth are being overstated, and that import volumes will remain healthy. While these may look like risky assumptions for the two Anglo-Australian mining giants, they stand a good chance of being correct.

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Australia’s carbon mess a warning to the world – by Clyde Russell (Reuters India – July 17, 2013)

http://in.reuters.com/

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

LAUNCESTON, Australia, July 17 (Reuters) – Any government thinking of introducing policies to limit carbon emissions should look at Australia for an example of how not to do it.

Australia’s efforts to combat climate change have been poison to politicians from all sides of the debate, contributing so far to the demise of two prime ministers and an opposition leader, and there may be more to come. The latest twist has seen Prime Minister Kevin Rudd decide to switch from a straight tax on carbon emissions to a floating emissions trading scheme (ETS) a year earlier than planned.

This has nothing to do with improving the workings of the scheme or limiting carbon emissions and everything to do with trying to win back voters angered by rising electricity prices and industries that have seen their international competitiveness eroded by the tax.

The theory is that power and other prices will decline as the cost of carbon permits is expected to be around A$6 per tonne – the level at which European permits are currently priced – compared to the tax of A$25.40 ($23.09) per tonne that had been planned from July 2014.

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UPDATE 2-ArcelorMittal abandons dormant Indian project – by Krishna N Das (Reuters India – July 17, 2013)

http://in.reuters.com/

NEW DELHI, July 17 (Reuters) – ArcelorMittal, the world’s top steelmaker, said it would scrap a planned steel plant in India due to delays in acquiring land and an iron ore mine, obstacles that have also caused South Korea’s POSCO to abandon plans.

The decision to scrap the planned 12 million-tonnes-a-year (MTA) plant in the eastern state of Odisha, comes a day after the world’s fifth biggest steelmaker, POSCO, said it was ditching a 6 MTA plant in the southern Karnataka state because of delays in receiving iron ore mining rights and opposition from residents which had held back land acquisition.

The failed projects will be a blow to India’s federal government, which on Tuesday relaxed foreign investment rules to draw in funds needed to turn around slowing economic growth and support a weak rupee.

ArcelorMittal India and China Chief Executive Vijay Bhatnagar said the company’s other two projects in mineral-rich states of Jharkhand and Karnataka were making “steady progress” and it would continue to pursue them.

The Jharkhand plant is expected to have an annual capacity of 12 million tonnes, while the one in Karnataka is expected to have capacity of 6 million tonnes.

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UPDATE 3-Big iron ore miners go for volume even as glut looms – by James Regan (Reuters U.S. – July 17, 2013)

http://www.reuters.com/

SYDNEY, July 17 (Reuters) – Record iron ore output from BHP Billiton and other mining giants appears to defy logic, with demand for the steel-making raw material cooling in top customer China and a price-eroding supply glut looming.

But the sector’s heavy guns are digging more for less to tighten their stranglehold on the world’s second-biggest commodity market, as competitors struggle.

In mining parlance, this is known as a “rebalancing” strategy, designed to improve the operating margins of the majors to such an extent that smaller competitors or new projects may be all but squeezed out.

“The majors want to maximise those economies of scale,” said MineLife sector analyst Gavin Wendt. “As long as they keep margins well ahead of a declining iron ore price, they are winning.” BHP Billiton, Rio Tinto and Fortescue Metals Group, with their iron ore operations in Australia, and Brazil’s Vale are leading the charge.

Seaborne-traded iron ore prices, which have lost 10 percent so far this year, are forecast to hit their lowest in four years by the end of 2013 as these big miners dig deeper and faster.

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