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Iron Ore

China doomsayers misguided and will be proven wrong – Vale CEO – by Juan Pablo Spinetto & David Biller (Mineweb.com/Bloomberg – March 20, 2014)

http://www.mineweb.com/

Vale CEO, Murilo Ferreira, says investors betting against China and its demand for iron ore from the company will be proven wrong.

Investors betting against China and the nation’s demand for iron-ore from top producer Vale SA will be proven wrong, Chief Executive Officer Murilo Ferreira said.

“The biggest enemy to our share price is a certain belief that China will be over,” Ferreira said during a presentation in Sao Paulo today. “They are once more betting against China as they did in 2004, 2005, 2006 and beyond and I think that people are going to fail again with their projections.”

Shares of Vale, which ships about half its iron ore and pellets to China, dropped to a five-year low earlier this month on concern a possible economic slowdown in the biggest buyer of the mineral will hurt sales. Iron-ore entered a bear market on March 7, losing 23 percent from a five-month high in August through today, as Australian miners including Rio Tinto Group boost supply and China tightens monetary conditions.

The world’s third-largest mining company has underperformed its main peers in the stock market for the past year as weakening demand growth in China and a multibillion-dollar tax dispute with Brazil weighed on investors’ confidence.

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Drug cartel a misnomer as Mexico criminal group earns more from mining, logging, extortion – by E. Eduardo Castillo (Associated Press/U.S. News and World Report – March 17, 2014)

 http://www.usnews.com/

LAZARO CARDENAS, Mexico (AP) — Forget crystal meth. The pseudo-religious Knights Templar drug cartel in western Mexico has diversified to the point that drug trafficking doesn’t even rank among its top sources of income.

The cartel counts illegal mining, logging and extortion as its biggest moneymakers, said Alfredo Castillo, the Mexican government’s special envoy sent to restore the rule of law in Michoacan, the state controlled by the Knights Templar the last several years.

Iron ore “is their principle source of income,” Castillo told The Associated Press. “They’re charging $15 (a metric ton) for the process, from extraction to transport, processing, storage, permits and finally export.” The ore itself doesn’t go for that price; the cartel skims $15 for every ton arriving in port. While it’s long been known that Mexican cartels engage in other types of criminal activity, including trafficking of people and pirated goods, this is the government’s first official acknowledgement that a major organized crime group has moved beyond drugs. The Knights Templar and its predecessor, La Familia, started out as major producers and transporters of methamphetamine.

The implications are enormous that organized crime in general in Mexico stands to diversify and become even more entrenched.

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Why miners aren’t panicking about the latest commodity drop – Peter Koven (National Post – March 13, 2014)

The National Post is Canada’s second largest national paper.

While steep declines in copper, iron ore and coking coal prices have spooked investors, they are not severe enough to disrupt the mining sector at this stage.

The vast majority of projects can generate decent margins at these price levels, according to experts. Though in the case of coal, there has been enough of a drop to make high-cost producers nervous.

Prices for all three commodities have been under pressure throughout 2014, but they plummeted over the last several days due to economic concerns out of China. Manufacturing activity has been weaker than expected, and a bond default by a solar company raised fears of tighter credit conditions. That hit the copper market in particular, as many Chinese companies use the red metal as collateral to raise money.

Chinese steel mills are also being threatened as the government tightens environmental standards. That is putting pressure on coal and iron ore.

Copper has sunk to near a four-year-low, falling below the psychological barrier of US$3.00 a pound.

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BHP upbeat on iron ore growth – by Mitchell Neems (Business Spectator – March 11, 2014)

 http://www.businessspectator.com.au/

As the fall in the iron ore price continues to send shockwaves through global markets, mining giant BHP Billiton says its focus on productivity is starting to deliver value to its iron ore business and it expects demand for steel to grow over the next decade.

Speaking at the AJM Global Iron Ore and Steel Forecast conference in Perth, BHP’s iron ore president Jimmy Wilson said the group remains confident global demand for iron ore will continue to grow, though likely at a more moderate rate, driven by urbanisation and industrialisation.

“Our market outlook is for continued strong steel demand growth over the next 10 years,” he said. “Our view that Chinese crude steel production is expected to peak at 1.1 billion tonnes, around 2025, is unchanged.” Recent world iron ore growth had been driven by Australian production, he said.

Mr Wilson added that demand over the next 10 years would be maintained as 1.2 billion people globally moved to urban areas, including 240 million people in China.

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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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