Bubble warning as iron ore futures smash records Luo Guoping and Yang Ge Dec 23, 2020 – 4.12pm Iron ore futures soared to all-time highs this week in China, more than doubling from April levels, prompting the local exchange operator to warn of a speculative bubble as Beijing sent signals that could foreshadow government intervention. As the producer of more than half of the world’s steel, China is also the biggest iron ore importer and its largely state-owned production complex employs thousands around the country. China's steel industry relies on Australian iron ore. Qilai Shen Accordingly, producers and officials in Beijing closely follow the price of iron ore – one of the main components of steel production – and have pushed for China to play a larger global role in determining its price. That price has soared in recent months, with the benchmark contract on the Dalian Commodity Exchange rising nearly 10 per cent on Monday alone to 1144.5 yuan ($231) a ton – a record since the contracts began trading in 2013. The price represented a 50 per cent jump from the levels of late October and was more than double the price of early April when many factories were closed or partially shut down at the height of China’s COVID-19 epidemic. The spike prompted the Dalian Commodity Exchange to issue a statement on Sunday saying that speculative funds had poured into the market this year seeking to take advantage of imbalances in China’s massive steel sector. It also pointed out that despite the big gains, contract prices on the exchange have been consistently below international levels, which are also at a seven-year high. Future and spot prices have been pushed higher by tighter supplies created by the partial shutdown of a major mine in Brazil operated by that country’s Vale, the world’s second-largest producer. https://www.afr.com/world/asia/bubble-warnings-as-iron-ore-futures-hit-records-20201223-p56pv5
Ellison stake in API wakes iron ore’s ‘sleeping giant’ Peter KerResources reporter Updated Jun 1, 2021 https://www.afr.com/companies/mining/ellison-wakes-iron-ore-s-sleeping-giant-20210601-p57x22 Rich Lister Chris Ellison has acquired a stake in Australia’s biggest dormant iron ore project in a move that will help accelerate plans to turn his company, Mineral Resources, into an iron ore powerhouse by quadrupling exports in the next five years. Mineral Resources has struck a deal that gives it an indirect 7.5 per cent stake in the long dormant Australian Premium Iron (API) joint venture, arguably Australia’s biggest undeveloped iron ore project. Mineral Resources wants to raise its total iron ore output from about 21 million tonnes this year to 92 million tonnes over the next five years. A subsidiary of Mineral Resources has bought rail provider Aurizon out of the project, breathing life back into a project that has lain largely dormant since 2014. The deal is the latest sign that extremely high iron ore prices are reviving discarded iron ore projects, with developers also trying to revive mines in Western Australia’s mid-west and on the iron-rich islands off the Kimberley coast. Mr Ellison’s plan to develop a new iron ore port near the WA town of Onslow to serve the West Pilbara iron ore province had convinced many industry insiders that he would be a key player in efforts to revive API, which is a joint venture of four companies with varying levels of desire to develop the project. Under the fine detail of the transaction, the Mineral Resources subsidiary has bought Aurizon’s 15 per cent stake in Aquila Resources, which was an ASX listed company until Aurizon partnered with China’s biggest steelmaker, Baowu, in 2014 to complete a $1.42 billion takeover and privatisation. Aquila holds a 50 per cent stake in API, meaning Mineral Resources now effectively owns 7.5 per cent of API, while Baowu still owns 42.5 per cent. US company AMCI and South Korea’s Posco both own about 25 per cent of API. Transport infrastructure The 2014 takeover of Aquila was built on the expectation that API would be a $US7.4 billion mine, rail and port project to unlock the West Pilbara. But iron ore prices slumped dramatically in the two years after the acquisition, meaning the project was largely abandoned until the past 18 months, when some members of the joint venture set about trying to revive it to seize on high iron ore prices. In recent months the API proponents have spoken to several incumbent iron ore miners in a bid to get a smaller, lower-cost project up and running by using the existing transport infrastructure of the incumbents. Those smaller plans effectively ruled out the prospect of building a dedicated railway for API, which reduced API’s appeal to Aurizon, which is a rail specialist. Mr Ellison has ambitions to be the provider of transport infrastructure to API and plans to use private haul roads through the West Pilbara to carry iron ore to the proposed port near Onslow, which will use trans-shipping to export 30 million tonnes of iron ore a year. Mineral Resources also has some mines in the West Pilbara that would use the Onslow port. Mineral Resources wants to raise its total iron ore output from about 21 million tonnes this year to 92 million tonnes over the next five years. API looms as a big part of that five-year goal, along with a push to increase exports through Australia’s top iron ore export facility, Port Hedland. The deal ends Aurizon’s unsuccessful push into Australia’s Pilbara iron ore heartland, which cost $210 million in initial investments in 2014 plus further spending in subsequent years on evaluating the project. Corporate documents suggest Aurizon received just $10 million from Mineral Resources for the stake and while that is a paltry sum compared to its original investment, the payment is actually an improvement on the zero carrying value Aurizon had ascribed to the stake since February 2016. The Aquila stake also gives Mineral Resources exposure to Queensland’s Eagle Downs coking coal project and some South African manganese, but neither are expected to be of great interest to Mr Ellison, with the acquisition focused on iron ore. Mineral Resources (MRL) confirmed as much in a statement on Tuesday evening. “MRL has agreed with Aquila’s 85 per cent shareholder, Baosteel Resources Australia Pty Ltd, to seek to progress a restructure of Aquila so that MRL’s interests are limited to its iron ore assets, subject to various approvals and other conditions, including regulatory approvals, being met,” said a spokesman for Mineral Resources. The comments suggest Baowu could be poised to demerge its stake in Eagle Downs, which is a joint venture with South32 and is hampered by the high cost of rail and port capacity linked to the asset, regardless of whether it uses that infrastructure capacity. South32 and Baowu baulked at developing the project shortly before Christmas when a feasibility study was completed, with South32 boss Graham Kerr saying Eagle Downs would have made money, but not enough to warrant the investor angst that would come with building a new coal mine. “When we looked at the completion of the feasibility study for Eagle Downs, it certainly was a positive project, it had an IRR [internal rate of return] that to be honest, if it was a base metals project, we would have done it,” he said in May. “But there is probably not enough in it to do a met [coking] coal mine.” The API deal builds on the strong relationship between Mineral Resources and Aurizon, under which Aurizon carries some of Mineral Resources’ existing iron ore to port in southern WA. The sale is the latest example of Mr Ellison buying iron ore assets at super cheap prices. He bought the WA iron ore assets of US miner Cliffs for effectively no price in June 2018 when iron ore prices were closer to $US70 per tonne, rather than the $US198.75 per tonne measured by S&P Global Platts on Monday night. Mr Ellison also picked up a Pilbara mine called Wonmunna in October for an immaterial cash amount plus royalty payments on the first 40 million tonnes produced. That mine was brought into production in March, meaning it has capitalised on record iron ore prices over the past month. The sale of the API stake also amounts to a win of sorts for Aurizon boss Andrew Harding, given he has capitalised on high iron ore prices to exit a stake that was non-core and was afforded zero value on Aurizon’s books when he was appointed managing director in December 2016. Mr Harding was running Rio Tinto’s iron ore division, including its extensive Pilbara railway network, when Aurizon made its 2014 investment in Aquila. Baowu now has two big Australian iron ore decisions to make; whether to invest in bringing API into production and whether to continue as a partner in Fortescue’s Iron Bridge project now the cost has blown out by up to $US900 million.
Monsters of Rock: Simandou, iron ore’s ‘Rolls Royce’, is back in the garage Mining 16 hours ago | Josh Chiat https://stockhead.com.au/resources/...-iron-ores-rolls-royce-is-back-in-the-garage/ The chooks are coming home to roost after Guinea’s September Coup d’Etat, after the military’s ‘transitional government’ sensationally ordered a halt to work on the Simandou iron ore mine. Simandou is a monster a multi-billion tonne deposit of ultra high grade direct shipping ore which will require hundreds of kilometres of new railway to develop. It has been expected to proceed in a couple parts. First is Blocks 1 & 2, awarded to a consortium backed by China a couple years ago. They’re the ones doing the heavy lifting on the multi-billion dollar railway line and port infrastructure in a bid by China to reduce its reliance on iron ore from Australia and to a lesser extent Brazil, and improve the self-sufficiency of its steel supply chain. The other two blocks, 3 & 4, are 45% owned by iron ore giant Rio Tinto (ASX:RIO) with the balance owned by China’s Chinalco and the Guinean Government. Rio’s been in the game since 1997 but has found developing Simandou an absolute chore. Previous studies to develop the mine were rumoured to have come with price tags so high the cost was too much for even Rio to shoulder. It has revived its interest in recent years on the back of higher iron ore prices and its need to improve the grade of its ore mix. Rio executive Bold Baatar last year described Simandou as the “Rolls Royce of iron ore.” Well, that Rolls Royce has been parked up in the garage after some pretty clear comments from a spokesman for former post coup interim president and military strongman Mamady Doumbouya last week on national TV. “He therefore ordered the cessation of all activity on the ground pending the answers to questions posed to various actors and the clarification of the operational mode by which the interests of Guinea will be preserved,” the spokesman said. Rio revealed in a meeting with UBS analysts last year it planned to make an investment decision on Simandou in 2022. But efforts to develop the mine have been stymied for years by costs, market conditions and unpredictable Guinean government policy, highlighting the challenges for western iron ore producers operating in West Africa. Rio CEO Jakob Stausholm met with Guinea’s post-coup government in December, and has expressed interest in sharing infrastructure with the SMB Winning Consortium developing the other two blocks to get its share of the project off the ground.
Iron ore miners accelerate African push Peter Ker Resources reporter Jul 28, 2022 https://www.afr.com/companies/mining/iron-ore-miners-accelerate-african-push-20220728-p5b5fg Australian iron ore miners’ push into Africa has accelerated, with a Fortescue travelling party working on “very progressed” negotiations with the government of Gabon, and Rio Tinto taking a big step towards building a new mine, rail and port business in Guinea. Australia is the world’s biggest exporter of iron ore, but with the best resources already taken during 55 years of mining in the Pilbara region, local producers are joining the rush toward Africa’s super-high-grade resources. Rio Tinto’s plan to develop Simandou has taken a step forward. Rio Tinto Guinea’s Simandou mountains have long been touted as Africa’s most significant future iron ore province and Rio helped break a stalemate over the development of Simandou on Thursday when it agreed to work with the military junta that now rules the nation to build the rail and port infrastructure to bring Simandou’s ore to market. The Simandou mining consortium led by Rio will become 42.5 per cent owners of a new company called La Compagnie du TransGuinéen (CTG), which will build more than 600 kilometres of railway and a port to service the Simandou mines. Difficulty in funding such infrastructure – expected to cost tens of billions of dollars – has delayed development of Simandou for more than a decade, but the creation of CTG will allow the parties to start fundraising. The new company will be 15 per cent owned by the Guinean government, which has been ruled by Mamady Doumbouya, a former officer in the French Foreign Legion, since he led a military coup in September. The Chinese, Singaporean and French consortium that has rights to mine next to Rio in the Simandou mountains, known as Winning, will own 42.5 per cent of CTG. If previous cost estimates are any guide, Rio could be facing an outlay of close to $US3 billion for its share of port and rail costs. Fortescue to focus on Gabon Fortescue has tried to get involved in Simandou at various times in recent years, but chief executive Elizabeth Gaines said the company had been putting more effort into building a new mining province in Gabon. “We have recently sent quite a significant team to Gabon to assess infrastructure, the geology as well as community engagement,” she said on Thursday. “That work is progressing, including finalising the formal agreements with the government there. “It is well advanced, we have had very good engagement with the government in Gabon, and that is very progressed.” Western Australia’s Pilbara iron ore heartland has become a harder place to mine in the past three years on the back of labour shortages, declining grades, inflationary pressures and an enhanced focus on Indigenous cultural heritage. But Ms Gaines said Fortescue’s push into Africa was motivated by a desire to diversify its product offering. “This is about large volumes of very high-grade material,” she said. “It is a different type of ore, it is a very high grade, dry processing, so it would complement our existing product mix.” An African hub would also protect Australian miners should China ever seek to reduce the amount of Australian ore it consumes, as it did with coal over the past two years. Rumours persist that a new Chinese company called China Mineral Resources Group will act as a central buying agency for the nation’s iron ore needs, thereby reducing foreign miners’ ability to charge high prices for the bulk commodity. Ms Gaines said Fortescue had not had any direct engagement with the new company or with existing customers in relation to it. Uncertainty over new Chinese model She said the existing iron ore market system worked well but her company was open to a new model. “Our view is prices will ultimately be determined by supply and demand for iron ore. We have not had any formal guidance yet for how this platform may operate but we are monitoring that very closely,” Ms Gaines said. “We are always open to engage with our customers to better understand their needs and demand for our products.” Rio chief executive Jakob Stausholm told investors on July 27 that it was not yet clear whether the new entity would carry out all the activities that “rumours” suggest it will. The comments came as Fortescue confirmed it had exported record volumes of iron ore for the third consecutive year. The 49.5 million tonnes of ore shipped by Fortescue over the past three months was better than the 48.9 million expected by analysts, and took annual exports to 189 million tonnes. Fortescue originally planned to ship between 180 million and 185 million tonnes in the year to June, but raised its guidance to between 185 million and 188 million tonnes in April. Fortescue said on Thursday it may set a fourth consecutive export record in the year ahead by shipping as much as 192 million tonnes. Higher export volumes often deliver economies of scale that reduce unit costs of production, but that will not be the case in the year ahead amid severe inflationary pressures. Fortescue’s unit costs over the past three months were 13 per cent higher than in the same quarter last year, and the miner said the lag effect of inflation would ensure they were higher again in the year ahead at between $US18 and $US18.75 a tonne. That cost target will be well above the unit costs of $US15.91 a tonne over the past year, and about 34 per cent higher than the unit costs achieved in the year to June 2021. Fortescue’s clean energy division, Fortescue Future Industries, spent $US534 million over the past year; $US386 million of that was “operating expenditure” rather than capital investment. FFI’s spend over the past year was within the company’s guidance, but it excluded some costs that some analysts believed should be allocated to the division, such as the $US223 million spent on acquiring battery manufacturer Williams Advanced Engineering. Fortescue said FFI would spend between $US600 million and $US700 million in the year ahead. The spending will once again be dominated by “operating expenditures” such as employee salaries, project evaluation, promotional advertising and travel. Fortescue said FFI’s operating expenditures would soar by at least 30 per cent in the year ahead to between $US500 million to $US600 million. FFI’s capital investment is forecast to decline to $US100 million, with most of that devoted to a hydrogen electrolyser factory in Gladstone. Peter Ker covers resource companies, based in Melbourne. Connect with Peter on Twitter. Email Peter at pker@afr.com
$3 billion iron ore project greenlit for WA By Derek Rose August 29, 2022 https://www.smh.com.au/business/com...-project-greenlit-for-wa-20220829-p5bdp6.html Mineral Resources and its joint venture partners have agreed to go ahead with a $3 billion iron ore development described as one of the largest ever undertaken in Western Australia. Work on Onslow Iron Project 150km east of Onslow in the West Pilbara region is targeted for June, with first ore shipments expected on ship as soon as December 2023. Mineral Resources managing director Chris Ellison. Mineral Resources will manage all operations and build a 150km private haul road to the Port of Ashburton, where ore will be transported via the company’s fleet of autonomous 320-tonne “road trains”, massive trucks bigger than semi-trailers. Phase one of the Onslow project is targeting an annual capacity of 35 million tonnes per annum and is estimated to produce at a cost of $US32.23 a tonne, excluding royalties. Iron ore is currently selling at $US108 a tonne. Mineral Resources managing director Chris Ellison said the project was set to “redefine mining in Western Australia”. “We look forward to delivering solid returns for our joint venture partners and shareholders, creating thousands of jobs, injecting billions of dollars in the economy and working with the Traditional Owners, the Thalanyji people and the Robe River Kurama people, pastoralists and the wider community, to provide them with long-term benefits and economic opportunities,” Ellison said. The other parties in the Red Hill Iron joint venture are state-owned Chinese steelmaker Baowu, South Korean steelmaker Posco, and US-based resource company investor AMCI Investments. They’ve all agreed that Mineral Resource will increase its stake in the project from 40 per cent to 57 per cent by funding $1.3 billion of the project’s capital expenditure via a loan. AAP
China pumps another billion dollars into Australian iron ore Peter Ker Resources reporter Sep 14, 2022 https://www.afr.com/companies/minin...lars-into-australian-iron-ore-20220914-p5bhxa China’s biggest state-owned steelmaker will invest more than a billion dollars in a new Australian iron ore mine in the “spirit of sincere cooperation” in a sign that diplomatic tensions between Beijing and Canberra are not a complete barrier to commerce. Baowu’s decision to invest in Rio Tinto’s $US2 billion ($2.96 billion) Western Range iron ore mine comes after major changes were made to the project to protect Indigenous heritage sites and barely two weeks after the steel giant backed Chris Ellison’s plan to build a new iron ore province in the West Pilbara region of Western Australia. In rare comments that cut a stark contrast to frosty diplomatic relations between the Chinese and Australian governments, Baowu described its long relationship with Rio as a “win-win”, which had built “friendship and trust”. The steelmaker said it wanted to “deepen” the relationship by expanding into “more fields” with Rio. Western Range has for years loomed as the logical extension of Rio and Baowu’s 20-year-old “Bao-HI” joint venture at the Eastern Range iron ore mine in WA, but the establishment of a new joint venture structure to develop Western Range was delayed by several years. Significant design changes to preserve Indigenous heritage at Western Range were one of the major reasons for the delay, but the delays to Western Range also coincided with a period when China was refusing to buy Australian commodities like barley, wine and coal. Other miners working on Australian projects with Baowu had been given the impression in recent years that the steel giant would not invest in new Australian projects while diplomatic tensions were poor. Wednesday’s final investment decision to build Western Range will cost $US2 billion in total with Baowu liable for $US700 million ($1.03 billion) of that spend in line with its 46 per cent stake in the project. Rio will cover the remaining $US1.3 billion in line with its 54 per cent stake. Construction will start in 2023 and the mine is expected to be selling iron ore by 2025, with maximum annual capacity of 25 million tonnes. Baowu will be the biggest customer for the iron ore that comes from Western Range, agreeing with Rio to buy 126.5 million tonnes over 13 years. “The signing of the joint venture agreement for the Western Range Project is a significant event in the history of cooperation between Baowu and Rio Tinto,” said Baowu Resources Chairman Shi Bing in a statement. “We fully appreciate the persistent efforts of both teams in accomplishing the important achievement. The Bao-HI joint venture has been successfully operating for more than 20 years, leading us to a win-win result, and reaping friendship and trust. “We hope that the two parties will deepen the mutually beneficial and win-win partnership, continue to carry forward the spirit of sincere cooperation and further expand cooperation in more fields and aspects on the basis of working together to operate the project well.” Rio’s iron ore boss Simon Trott said Baowu was Rio’s biggest customer globally, making the deal an important one. “We have enjoyed a strong working relationship with Baowu for more than four decades, shipping more than 200 million tonnes of iron ore under our original joint venture, and we are looking forward to extending our partnership at Western Range. “The development of Western Range represents the commencement of the next significant phase of investment in our iron ore business, helping underpin future production of the Pilbara Blend, the market benchmark.” Rio reshaped the Western Range mine plan at the request of the Yinhawangka traditional owners to avoid direct and indirect impacts on a culturally significant red ochre quarry called Garrabagarrangu, a water hole called Gardargarli as well as several nearby rock shelters. Waste dumps, conveyors and haul roads were relocated to preserve and protect heritage sites while several mining pits were removed from the mine plan altogether. The redesign of Western Range was one of the first examples of “co-management” of an Australian iron ore mine; a concept where native title custodians will have an active, iterative role in mine planning and which Rio has vowed to adopt since the destruction of cultural heritage at Juukan Gorge in 2020. Development of Western Range will require approval from Chinese and Australian governments and also Rio shareholders given the two companies are legally considered associates given Rio’s biggest shareholder is Chinese state-owned entity Chinalco. Rio shareholders will vote on the Western Range deal at meetings in late October, with the Australian meeting to be held in Perth.