Richest Woman in Asia-Pacific Buys Iron as BHP Calls End to Era – by Jasmine Ng and David Stringer (Bloomberg News – November 21, 2014)

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Gina Rinehart, the Asia-Pacific’s richest woman, is set to start exports in September from her new A$10 billion ($8.6 billion) iron ore mine undeterred by prices trading near five-year lows and forecast to extend losses.

“We don’t like the ore price going down, but we’re in the lower quartile” of production costs, Rinehart, chairman of Hancock Prospecting Pty, said yesterday in an interview at the Roy Hill mine in Australia’s iron-rich Pilbara region.

She was talking just hours after Andrew Mackenzie, chief executive officer of BHP Billiton Ltd. (BHP), called an end to the era of “massive expansions of iron ore.” BHP and rivals Rio Tinto Group (RIO) and Vale SA (VALE5) are flooding the global market, spurring a surplus after a $120 billion spending spree to boost the capacity of their mines from Australia to Brazil.

“I don’t think next year would be ideal to be adding new supply,” Daniel Morgan, a Sydney-based analyst at UBS AG, said in a Nov. 17. phone interview. “The market is pretty well supplied for the next few years.”

BHP stock lost 4.7 percent in Sydney this week for the biggest weekly loss since March, while Rio shares fell 6.1 percent. Fortescue Metals Group (FMG) Ltd., the country’s third-biggest shipper, retreated 54 percent this year.

The largest producers are targeting record shipments, betting the increase will offset the plunging prices and force less competitive mines to close, including production in China, the largest buyer of seaborne supplies.

‘Last People Standing’

“Our view is that there’s a sustainable long-term iron ore demand,” Barry Fitzgerald, CEO of Roy Hill Holdings Pty, told reporters. “The market economics will always demonstrate ultimately the high-cost producers will need to exit the market and therefore leave us among the other low-cost producers as one of the last people standing.”

Rinehart, who also owns stakes in iron ore mines operated by Rio Tinto, sold 30 percent of Roy Hill to a group including South Korea’s Posco, Japan’s Marubeni Corp. and Taiwan’s China Steel Corp. The overseas partners will take a share of production from Roy Hill, according to the company website.

“It’s probably been a long-held goal to get something she controls into the market,” UBS’s Morgan said. “She’s obviously got a high exposure to the iron ore market through her other business interests. This is the first time she gets to control an asset.”

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