Iron Ore

[Dukey]

Just read this worthwhile article about haematite versus magnetite Fe sources & the BHP/RIO game. Well worth a read so I thought I'd re-post here in a more general Fe thread -( hope you don't mind R! )

This guy at least is convinced that Magnetite projects will struggle.

Article posted by RIMTALAY on TTY thread

Rio could trample iron minors
By Tim Treadgold


PORTFOLIO POINT: It’s plan to treble output of haematite, the higher-quality iron ore, would wreck the prospects of small magnetite producers.


When elephants fight smaller animals run for cover. It’s the same in the corporate world, which an entire sub-sector of the iron ore business is about to discover as it becomes potential “collateral damage” in the battle between Rio Tinto and BHP Billiton.

Yes, the BHP move on Rio is good for iron ore stocks but only haematite iron stocks. For magnetite iron stocks, it's very bad news. And the magnetite iron sector houses some of the best known punters’ favourites in the mining industry. There's Gindalbie Metals and takeover target Midwest Corporation, along with Atlas Iron, Cape Lambert Iron, Grange Resources, Australian Resources and Goldstream Mining. If you have bought – or are about to buy into – any of these stocks think, again. Here's why:

Magnetite miners were already in trouble but this week's Rio Tinto defence has loaded the odds against them. Rio has revealed plans for a spectacular increase in the production of haematite, possibly trebling output from about 200 million tonnes a year to more than 600 million tonnes, with 420 million tonnes coming from the Pilbara region of WA.

That expansion, which represents a dramatic acceleration of mine development plans, is designed to give Rio Tinto a bigger slice of the world iron ore market than it already has. However, it also means much less room for new, high-cost, miners – and the newest and highest cost are the magnetite hopefuls.

Put simply, magnetite is an inferior ore to haematite – and it's haematite that's preferred by the world’s major iron ore exporters, including BHP Billiton, Rio Tinto and the big Brazilian, Companhia do Vale Rio Doce (CVRD) – and, from next year, Fortescue Minerals. It's also the iron ore preferred by all the miners in my October feature Iron ore’s hotter prospects.

Why are the magnetite miners heading downhill?

The ore itself contains much less iron. Typically, haematite grades 55–60% iron, while magnetite is 30–35%.
Processing magnetite involves physical separation of the iron and the waste rock, and then intense heating, before conversion to a semi-finished product such as high-value pellets.
While the physical separation process is easy (as the name implies magnetite is strongly magnetic), the heating requires very large amounts of energy – a luxury at a time when the oil price is approaching $US100 a barrel, and coal prices are rising in sympathy.
The capital cost of magnetite processing is also high. None of the planned projects in Australia come in at less than $1 billion, and raising the debt component for all resource projects has become a lot harder as banks retreat under the sub-prime credit onslaught.

In a resources boom, when supplies are tight and prices high, mining and processing magnetite might make sense although very little of the material is transported over long distances without expensive upgrading.

Of course, those mining magnetite iron won't agree. True believers in magnetite argue that it is the iron ore of the future, that Chinese customers are comfortable working with it, and that Australia is endowed with vast deposits of the material.

They’re right on all three claims. The Chinese do want it, the outback of WA is littered with trillions of tonnes of the stuff, and it is an ore of the future.

But, those same Chinese steel mills that say they will buy magnetite, and are willing to invest in Australian projects, will soon be offered increased supplies of haematite thanks to existing expansion planned by CVRD and BHP Billiton, and even more now that Rio Tinto is running scared from BHP Billiton’s marriage overtures and seeks to impress its shareholders by expanding faster than anyone else.



The deciding factor for customers will be price and reliability of supply. On both of those measures haematite, whether from a mega-miner or one of the smaller producers, will be the winner.

What this means for stockmarket values is:

Companies offering a pure magnetite investment proposition, such as Grange, Cape Lambert, and Australasian will struggle. They might prosper in the future but it could be a very, very, long wait for a dividend cheque. Best advice: sell.
Companies that offer a mixed haematite/magnetite investment proposition, such as Gindalbie, Midwest, and Atlas, are almost certainly over-priced. They will make money from selling haematite, but they will struggle to raise the capital or secure energy at a reasonable price to make the jump to magnetite production. Best advice: sell.
Companies that are pure haematite propositions, even if small, have the appeal of production simplicity, and customer preference in their favour. Stocks such as BC Iron, Yilgarn Mining, and FerrAus are following the KISS principle of “keep it simple, stupid”. Best advice on KISS stocks: buy.

The debate over magnetite and haematite is broadly similar to the historic debate of replacing high-grade “sulphide” nickel ore with low-grade “laterite” ore, the key being that there is much more laterite ore in the world than scarce deposits of sulphide material.

But, that comparison fails two tests.

There is no shortage, yet, of haematite as Rio Tinto is demonstrating by casually rolling out a plan to triple output.
Processing laterite ore has been a disaster for everyone who has tried it. Anaconda Nickel (now Minara Resources) was almost destroyed by design failures. BHP Billiton has been hit by a doubling in cost and time at its Ravensthorpe laterite nickel mine in WA.

Sad as it might be, the simple truth about mineral processing is that Australia is not very good at it. High internal costs, such as long transport distances, expensive labor (and potentially getting more expensive), and high energy costs mean that more processing plans fail than succeed.

In WA, an epicentre of the current global commodity boom, and a centre of past booms, there is an appalling record of processing failure with the common thread being high energy costs and distance from markets.



Today’s “magnetite promotion boom” has the hallmarks of booms (and busts) past.

Readers with long memories will recall the time when WA was going to be home to a number of steel mills. In fact, the requirement to build a steel mill is contained in the original iron ore access agreements signed with the WA Government in the 1960s by the corporate ancestors to the modern BHP Billiton and Rio Tinto.

There are no steel mills in WA. But there are: a failed blast furnace at Kwinana; two failed iron pellet-making plants; and a failed hot-briquetted iron plant (that almost crippled the John Prescott-era BHP). There might be a successful HIsmelt plant.

It’s the same with plans for petrochemical plants along the west coast (Alan Bond and the late Laurie Connell promised one of those); numerous chlor-alkali plants converting salt and natural gas into caustic soda and plastics feedstock (none yet); paper pulp plants; and aluminium smelters – to name the best, and least successful.

Magnetite, despite its undoubted potential, is just the latest boom-time commodity, and it faces the same hurdles as all previous west coast boom-time commodities:

Isolation and long transport distances.
High energy costs.
Poor, or non-existent, infrastructure.
Dithering government.

Chinese demand for iron ore lies behind the rush to develop magnetite processing plants, and while one or two might be built they will be the high-cost source of iron and will deliver investment returns (if any) far below the simpler haematite mines of BHP Billiton, Rio Tinto and some of the smaller miners.

For the final test of this investment comparison between magnetite and haematite consider the level of involvement by BHP Billiton, Rio Tinto and CVRD in magnetite – zero. What else do you need to know?

# note :I'm not holding any Fe stocks at the mo. Though will be sorely tempted again by GIR on further investigation - seeing they are targeting H-Fe. ... I know you're onto that one grace - good luck there - I may well join you sooner or later!!

 

[brodion]

Great reading good work thanks for the info.......................................................................................................................

 

[moneymajix]

December 20, 2007


Reduced Brazilian iron ore shipment to put pressure on Chinese market


It is reported that Brazilian iron ore giant Vale has delayed vessels from taking shipments of iron ore from Brazil to China due to an accident that damaged a berth of a port in Rio de Janeiro state on December 8th 2007.

Earlier in November 2007, it has postponed some 15 to 20 shipments totaling 3 million tonnes from the ports of Ponta da Madeira in Brazil’s northern state of Maranhao and Ilha Guaiba in Rio de Janeiro state following problems include rains and the railway blockages. Vale has also resorted to other measures for slashing iron ore supply to China.

Brazil's ore shipment to China is estimated to reduce by 3 million tonnes to 3.5 million tonnes till January 2008. In this case, ore imports price is set to move up further in days to come on back of strong steel market and firm domestic ore concentrate price.

Meanwhile, China's domestic iron ore concentrate supply shortage has become more severe as Beijing tightens efforts in closing mini ore mines coupled with power disruptions and winter season. The EXW price for ore concentrate has reached a high of CNY 1600 per tonne in Tangshan. Market analysts expect domestic ore concentrate price to rise further in the first quarter of next year on supply shortage. A recovery in China's iron ore import market has sent up India's offerings for fines with 63.5% Fe content back to the previous peak of nearly USD 200 per tonne after hovering at USD 180 to 185 per tonne CFR for two weeks.

An iron ore trader in north China said that "After holding back for some time, medium and small sized steel mills have to return to the market to buy for their production."



http://www.steelguru.com/news/index...ipment_to_put_pressure_on_Chinese_market.html

 

[moneymajix]

http://www.guardian.co.uk/feedarticle?id=7233435

Focus to shift to raw materials in '08 steel M&A
Reuters
Thursday January 17 2008

By Humeyra Pamuk

LONDON, Jan 17 (Reuters) - Steelmakers could focus their acquisition sights on raw materials in 2008, in a bid to reduce costs which are set to climb on the back of higher iron ore prices, a senior industry expert told Reuters this week.

The steel industry is bracing for a sixth straight year of iron ore price hikes in 2008 as annual contract talks between the mills and top iron ore producers Vale , BHP Billiton and Rio Tinto have begun.

The expectations in the market point to a 30 percent rise in the price of iron ore, a key raw material used to make steel, while industry sources in Australia have said Vale has offered an increase of 70 percent over current term prices.
"Those steel companies that are not self-sufficient in terms of raw materials will be seeking out raw materials-related companies," said Robert Miller, senior managing director of leading investment bank Miller Mathis, which advises the steel industry.
"There are a handful of major steel companies that are at or near self-sufficiency of raw materials but there are many that are still dependent on world markets," Miller said.
"I know of several major steel companies that are pursuing raw material acquisitions instead of focusing on buying primary producers," Miller said.
The world's sixth largest steel maker Tata Steel said it was looking for iron assets in the West Africa.
Arcelor Mittal , the world's biggest steel maker, has said it is aiming to lift its self-sufficiency in iron ore to 90 percent by 2018 from 47 percent today.

CHINA'S LIABILITY
In this picture, China, the world's top producer and consumer of steel, is among the countries which needs those raw materials the most.
Miller agrees.
"If I were in China I would certainly be looking at raw materials acquisitions because China's big liability is they have too few raw materials for a country of its size and stature," he said.
"What they need is to get raw materials to develop foreign markets for their products."
This need could prompt China to get involved in the possible takeover of Rio Tinto by the world's largest miner BHP Billiton , which could create a $350 billion plus mining giant.
"I personally think China should enter into the Rio Tinto transaction," Miller said.
"Because Rio represents about 30 percent of China's annual iron ore needs. This is a once in a lifetime opportunity for China to acquire such a huge amount of iron ore."
Miller believes China will soon join the rest of the world in permitting market-based transactions.
"It would be quicker, easier and more cost efficient for China to achieve world-class capability in steel by allowing foreign steel companies to partner with domestic steel makers," he said.
Miller does not foresee any steel company taking drastic measures due to recession fears but thinks rising production costs could eventually curb enthusiasm for acquisitions.
"There comes a point where you cannot pass on these cost increases anymore, then it begins to hurt profitability and if that happens your stock price will go down and you will not be thinking as optimistically about acquisitions." Independent investment bank Miller Mathis has advised on $46 billion worth of steel M&A business in 2006 and $5.7 billion in 2007.

(Reporting by Humeyra Pamuk; Editing by Michael Roddy)

 

[grace]

Just wondering about thoughts on iron ore companies.
I hold
MMX (mining already - need new rail to ramp up)
BHP
FRS (hoping to start 2009)
BRM (hoping to start 2009)
GIR (good holdings. Hope someone will take them over when they spin-off their iron ore)

I see Sinosteel have just bought in over 10% of Mid-West (after close transaction).
Biggest problem with my holdings is infrastructure and pleading with FMG to use their rail line (BRM).
Most iron ore stocks rallying. MMX has been dissapointing of late (SP that is).

 

[Wysiwyg]

Well it is hard to see what impact this USA turmoil will have on our companies when this is being said .. 25/01/2008 ..

``We still continue to see a strong market in China for all that we sell, and we don't see any signs of that changing,'' Chief Executive Officer Tom Albanese said in an interview in Beijing today. He also reiterated Rio's rejection of BHP's previous three-for-one stock bid.

China's economy expanded more than 11 percent for the fourth straight quarter, supporting global growth and demand for iron ore, copper and aluminum as a recession looms in the U.S. Albanese is visiting China as iron ore producers are in talks with steelmakers to settle annual contract prices, which may rise 70 percent, Credit Suisse Group said this month.

``In our view, if there was a possible recession in the U.S. it will only have about 1 percent impact on Chinese GDP,'' Albanese said after visiting Chinese clients and officials. ``We continue to see strong market conditions and prices.''

I don`t like being too far away from knowing, but at present with the (USA sub-prime loans thingy & recession talk) it is wait and see for a bit with market trends for me.

Of course it is only interpretation of data we are fed and over-reaction is still alive and well.

 

[moneymajix]

Disruptions force up coal and iron

Andrew Trounson | January 29, 2008

FINANCIAL markets may be sweating on a US recession, but prices for Australia's bulk mineral exports, coal and iron ore, are soaring as a spate of supply disruptions reveals just how tight markets are.


http://www.theaustralian.news.com.au/story/0,25197,23123690-5005200,00.html




PSP


http://www.asx.com.au/asxpdf/20080125/pdf/31735784z81rmn.pdf

RE: DRILLING TO COMMENCE AT WOOLSHED IRON ORE PROSPECT, MT GIBSON/YALGOO
OPTION AGREEMENT LAPSES

10c

 

[kpas]

BRM due to announce resource upgrade in Febuary.

Worth a look as it's SP has dwindled a little with the current US situation.

I need to go over old announcements to confirm it, but I beleive they are currently pushing to have a rail agreement in place by mid 2008 as well which should concrete their position further as a junior iron ore miner.

 

[grace]

BRM due to announce resource upgrade in Febuary.

Worth a look as it's SP has dwindled a little with the current US situation.

I need to go over old announcements to confirm it, but I beleive they are currently pushing to have a rail agreement in place by mid 2008 as well which should concrete their position further as a junior iron ore miner.

I hold. MOU with FMG is their best option so I read, although BHP rail line goes straight though their holding. Not much luck hitching a ride there though. I believe they are trying to get that MOU this year with FMG. MD supposed to have connections (ex BHP iron ore), as well as working on FMG with twiggy. I'll believe it when I see the MOU though. Hoping to start mining 2009.

 

[kpas]

I hold. MOU with FMG is their best option so I read, although BHP rail line goes straight though their holding. Not much luck hitching a ride there though. I believe they are trying to get that MOU this year with FMG. MD supposed to have connections (ex BHP iron ore), as well as working on FMG with twiggy. I'll believe it when I see the MOU though. Hoping to start mining 2009.

Also read somewhere that the ACCC was talking about pushing BHP to allow juniors access to it's infrastructure as a condition of the RIO merger? I should dig out a reference for this because it is a good read.

http://www.thewest.com.au/default.aspx?MenuID=32&ContentID=47292 (This is not the one I was thinking about, but its close)

 

[chewy]

Reports that contact price agreement has been reached at +65%.

http://uk.reuters.com/article/oilRpt/idUKL176439220080217

UPDATE 1-Nippon Steel agrees to 65 pct iron ore price rise
Sun Feb 17, 2008 4:09pm GMT

BEIJING, Feb 17 (Reuters) - Japan's Nippon Steel (5401.T: Quote, Profile, Research) has agreed to a 65 percent rise in the price it will pay for iron ore under term contracts, effective April 1, industry sources and a Chinese steel industry website said on Sunday.

Term iron ore prices had been widely expected to rise by 50 percent or more, after spot prices soared to record highs in 2007 and Chinese steel mills' demand showed no signs of abating.

The rise could squeeze margins for the steel industry, which is already facing rising costs for coke, coal, and shipping.

"An international steel mill has concluded 2008 iron ore negotiations. The 2008 iron ore price will rise by 65 percent," steel industry website Umetal said late on Sunday.

Industry sources said Nippon Steel had concluded the deal. That company could not be reached on Sunday evening.

Traditionally, all steel mills accept whatever price is first settled by any steel mill and one of the three top miners, Brazil's Vale (VALE5.SA: Quote, Profile, Research) or Australia's Rio Tinto (RIO.L: Quote, Profile, Research)(RIO.AX: Quote, Profile, Research) and BHP Billiton (BHP.AX: Quote, Profile, Research)(BLT.L: Quote, Profile, Research).

Li Xinchuang, vice president of the China Metallurgical Industry Planning and Research Institute, confirmed a price had been set but did not confirm which companies nor what price level.

A deal would be announced this week, Chen Xianwen, deputy general director of the China Iron and Steel Association, said on Sunday, while also declining to confirm the price or parties to the deal.

When asked if Chinese mills would accept a price settled by their Japanese counterparts, Chen said they would. "That's how the system works."

Steel mills had argued that an increasingly gloomy global economic picture justified limiting the additional amount they would pay for iron ore. But miners pointed to 16 percent rise in Chinese crude steel production last year and ongoing production and transport disruptions as supporting iron ore prices for the foreseeable future.

"We had expected 50 percent, but that was a conservative estimate. A 65 percent rise is very reasonable," said analyst Henry Liu of Macquarie Research.

Miners have chafed as spot prices for inferior grades of iron ore far exceeded the Australian and Brazilian ore sold under term contracts.

Rio Tinto, which is fighting off a takeover proposal by BHP, has said it would like to move to an index pricing system that would better reflect spot prices.

Chinese mills last year signed the deal for the first time, arguing that as the world's largest consumer of iron ore, China should have the first say in setting prices. The nation's top steel maker, Baosteel (600019.SS: Quote, Profile, Research), leads negotiations for the Chinese industry. (Reporting by Lucy Hornby; Editing by Paul Bolding)

 

[ithatheekret]

Nippon Steel , Japans biggest steel maker has reach prelim. agreement with CVRD for a 65% increase in the ore price according to a Thompson Financial flash .

 

[mick2006]

the 65% iron ore increase tops most analysts estimates, expect to see some strength in the sector over the coming weeks as analysts/brokers start increasing their price targets on companies such as FMG/MMX/MIS/TTY/SDL

 

[ithatheekret]

I read the post above mine . noted the flash from yesterday , and thought , hmmmm , they must have tried for a little higher and had to make do with a preliminary agreement .

Soon the calls on a steel slump and iron ore build up ( coal build up ) will emerge from certain brokerage houses .............

 

[Tiberium]

As you guys may already know that FDL is sandwiched between two of the biggest names in the iron ore industry with Rio and FMG. I’m interested to know if there was other junior iron ore explorer beside FDL which is located not far from FMG and FDL tenements. Can someone please help? Thank you.

 

[kransky]

lots of juniors are located right next to BHP and RIO... they all applied for the tenements around the existing Fe mines..

BRM, UMC, GIR ...

 

[habs]

does anyone know when the new iron ore terms are negotiated with bhp and rio? everyone is talking about this 65% price rise with the japanese steel company, but when does the all round price rises get confirmed and take place...?

 

[Broadside]

As you guys may already know that FDL is sandwiched between two of the biggest names in the iron ore industry with Rio and FMG. I’m interested to know if there was other junior iron ore explorer beside FDL which is located not far from FMG and FDL tenements. Can someone please help? Thank you.

like Kransky says, take a look at UMC...they've also done just a tad more drilling than FDL(!) and have more than just a conceptual target another good announcement today, just a matter of time before the wider market catches on. Next to no interest in this stock at ASF.

 

[Yeti]

As you guys may already know that FDL is sandwiched between two of the biggest names in the iron ore industry with Rio and FMG. I’m interested to know if there was other junior iron ore explorer beside FDL which is located not far from FMG and FDL tenements. Can someone please help? Thank you.

BCIron: http://www.bciron.com.au

BCI was formed in July 2006 to explore for and develop iron ore resources within
the Nullagine Project in the Pilbara Region of Western Australia. The Project is
an amalgamation of fourteen adjoining tenements held separately by ALK and
CSM, and covers approximately 1,500km² of prospective ground for Channel Iron
Deposits (CID s)
The tenements are strategically located 50 to 100 km east of BHP Billiton s
( BHP ) existing rail infrastructure and just 20 to 30 km north of Fortescue Metals
Group Ltd ( FMG ) proposed operations at Christmas Creek and Cloud Break.
The proposed rail line passes through BC Iron s western most tenement and the
existing road between Mt Newman and Nullagine passes within 10 km of the
pBC channel system.
The proximity to this important infrastructure potentially reduces capital costs for
an operation and makes any development scenario less onerous.
Within the tenements, 90 kms of pisolite bearing paleaochannel has been
identified in three separate project areas, with potential to realise significant
tonnages of CID.

 

[Tiberium]

BCIron: http://www.bciron.com.au

BCI was formed in July 2006 to explore for and develop iron ore resources within
the Nullagine Project in the Pilbara Region of Western Australia. The Project is
an amalgamation of fourteen adjoining tenements held separately by ALK and
CSM, and covers approximately 1,500km² of prospective ground for Channel Iron
Deposits (CID s)
The tenements are strategically located 50 to 100 km east of BHP Billiton s
( BHP ) existing rail infrastructure and just 20 to 30 km north of Fortescue Metals
Group Ltd ( FMG ) proposed operations at Christmas Creek and Cloud Break.
The proposed rail line passes through BC Iron s western most tenement and the
existing road between Mt Newman and Nullagine passes within 10 km of the
pBC channel system.
The proximity to this important infrastructure potentially reduces capital costs for
an operation and makes any development scenario less onerous.
Within the tenements, 90 kms of pisolite bearing paleaochannel has been
identified in three separate project areas, with potential to realise significant
tonnages of CID.

Thanks Yeti. I have been holding BCI since the last two week, when it was $1.15; I bought it only because it's located in Pilbara :. BCI has exploration target of approx. 45Mt (58%Fe) but I’m assuming the tonnage could be higher after the resource estimation on the Outcamp Well and Coongan Well prospects in this quarter. Thanks a bunch to Kransky and Broadside who have introduced UMC to me, it definitely has slipped through my net. Pilbara is a very promising location for every iron ore explorer there, including BRM.