Ailing Fortescue begins job cuts, hits out at rivals BHP and Rio Tinto – by Andrew White and Andrew Burrell (The Australian – April 30, 2015)

http://www.theaustralian.com.au/

Andrew Forrest has accused his two larger rivals, BHP Billiton and Rio Tinto, of jeopardising the budget by driving the iron ore price lower as his Fortescue Metals Group began cutting jobs.

Mr Forrest said the price would be driven lower unless the major producers checked their planned increase in production and stopped saying they intended to continue “oversupplying’’ the market.

“If we don’t get responsibility coming into the future actions and the current statements of the very multinational companies that derive their fortunes from our own land then the iron ore price will continue to fall, the budget will be thrown into jeopardy, the deficit will grow and our standard of living will fall,’’ Mr Forrest told broadcaster Alan Jones yesterday. “And it’s all completely avoidable. None of this had to happen.’’

Mr Forrest has refused to back down on calls for the producers to agree on slowing capacity expansion, despite attention from the Australian Competition & Consumer Commission over the possibility of collusion.

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Iron ore streak extends to nine days – by Daniel Palmer (The Australian – April 29, 2015)

http://www.theaustralian.com.au/

Iron ore has continued its march back toward $US60 a tonne in offshore trade amid rising hopes for more stimulus out of Beijing.

At the end of the latest session, benchmark iron ore for immediate delivery to the port of Tianjin in China was trading at $US59.20 a tonne, up 0.9 per cent from its prior close of $US58.70 a tonne.

The gains extend a withering run for the commodity that has come as a surprise to many, with a surge of over 25 per cent from its 10-year low of $US46.70 a tonne earlier this month. Much of this recovery has come in the past nine trading days, with iron ore last seeing a red session on April 15.

The developments have allowed for a strong bounce in stock prices within the iron ore sector, with BC Iron and Fortescue Metals leading the way.

The two WA-based miners endured a rare negative session yesterday during the current iron ore streak, with stock in both firms sinking around 5 per cent by the close as the broader market moved lower. Another lift in the commodity’s price overnight, however, leaves them primed to recover much of those losses during today’s trade.

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COLUMN-Iron ore rallies on small BHP output deferral? Ridiculous – by Clyde Russell (Reuters U.S. – April 23, 2015)

http://www.reuters.com/

LAUNCESTON, Australia, April 23 (Reuters) – While it’s well-known that markets can have irrational short-term moves, the 4 percent jump in Asian spot iron ore on Wednesday must be a more extreme case.

Spot iron ore .IO62-CNI=SI jumped to $52.90 a tonne from $50.80 on April 20, continuing its rally from the record low of $46.70 reached on April 2.

On the surface the catalyst for Wednesday’s spike was BHP Billiton’s announcement that it would defer an expansion of its output of the steel-making ingredient from 270 million tonnes a year to 290 million tonnes.

The future loss of 20 million tonnes from a market that’s oversupplied by multiples of that amount clearly isn’t a sound basis for a price rally. What it does show is a market where many participants are keen to call a bottom, and are happy to grasp onto any positive news as justification for a price rally.

It also shows that many in the market weren’t really reading into this week’s quarterly production reports from BHP Billiton, Rio Tinto and Brazil’s Vale.

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Neither Labor nor Liberal has handled WA’s mining boom well – by Larry Graham (Western Australia Today – April 23, 2015)

http://www.watoday.com.au/

Western Australia has a serious problem it needs to deal with. When confronted with unprecedented growth in the mining industry, WA could take the easy political option of spending up big and business as usual, or the more difficult path of others in similar circumstances by putting the windfall revenue away for a rainy day.

When the Barnett Government belatedly opted for a sovereign fund, they chose the one of the worst possible models – and Labor opposed the entire concept. What this bellowed was that neither side of politics understood what was going on around them.

The end results of successive WA governments’ mismanagement of the unprecedented growth are more reminiscent of Nauru than of a progressive economy. It’s easy to jump into political hyper-talk mode and blame the GST and falling iron ore prices for our budgetary woes, however both these events are cyclical and predictable.

With regard to the GST distribution, the recent brouhaha has been a boon to the Premier and the media, but a quick peek at the WA Treasurer Christian Porter’s one and only budget will show that GST revenue has not yet fallen to the levels he predicted in May 2011.

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Iron Range slump appears set to last for a long time – by Lee Schafer (Minneapolis Star Tribune – April 23, 2015)

http://www.startribune.com/

A U.S. Steel spokesman last week emphasized the “temporary” nature of the idling coming at the company’s Keetac and Minntac operations in northeastern Minnesota.

But in looking around at the global industry, it’s shaping up as another of those slumps that sure won’t feel temporary when it’s done. It’s a global industry, and the news is bad all over.

Down in the Indian state of Goa, for example, an export industry that three years ago employed more than 100,000 may never come back. The government put it on hold for environmental reasons, and when it permitted mining to start up again this year there was no more market. Barge captains there can’t even sell their rusting hulks for scrap.

Over in western Australia, a leading market analyst last month asked for one of the iron mining companies to do the decent thing and go out of business. His other hope was that producers finally get serious about forming some sort of cartel to get a production cap, boosting prices. Financial analysts don’t usually openly call for price-fixing and collusion.

The pain isn’t just confined to ore, of course, because it’s just an input for making steel. In a recent steel industry report put out by the big Canadian bank BMO, none of the trend lines were heading up.

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Iron ore price rockets – by Frik Els (Mining.com – April 22, 2015)

http://www.mining.com/

The spot price of iron ore roared ahead on Wednesday despite all three of the biggest producers of the steelmaking material reporting record-setting output growth.

The 62% Fe import price including freight and insurance at the Chinese port of Tianjin added $2.10 or 4.1% to $52.90 a tonne on Wednesday, the highest since end-March according to data provided by The SteelIndex. The iron ore price has recovered 13% since hitting record lows at the beginning of April, but remains down 25% so far in 2015 after almost halving last year.

The jump in the Metal Bulletin’s benchmark 62%-index was even more spectacular tracking gains of 5.9% at the ports of Qingdao-Rizhao-Lianyungang in China to $54.04 a tonne on Wednesday, a four week high. MetalBulletin’s 65% Brazilian index soared $4.00 to a five-week high of $62 a tonne, nearly $7 higher than its record low.

The Big Three iron ore miners – Vale (NYSE:VALE), Rio Tinto (NYSE:RIO) and BHP Billiton (NYSE:BHP) – announced record production numbers on Tuesday and Wednesday, emphasizing the devastating effect a surge of new supply has had on the market just as demand from top consumer China is softening.

BHP isn’t putting the brakes on production growth – just making the most of its installed infrastructure to slash costs further.

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UPDATE 4-BHP blinks as iron ore prices fall, delays output boost – by James Regan (Reuters U.S. – April 22, 2015)

http://www.reuters.com/

SYDNEY, April 22 (Reuters) – BHP Billiton is slowing down its expansion plans in iron ore, the first big miner to pull back as a global supply glut sends ore prices tumbling.

The world no. 3 producer said it would delay an Australian port project that would have boosted output by 20 million tonnes and buoyed annual output to 290 million tonnes by mid-2017.

While BHP’s pullback is small compared with overall seaborne iron ore trade of around 1.3 billion tonnes, it is viewed as significant given BHP’s position as an efficient producer.

“It is probably more a symbolic posturing position by BHP, but it also likely signals the bottom of the iron ore market, given this action is being taken by one of the lowest cost producers,” said Mark Pervan, head of commodities for ANZ Bank.

Some analysts said the move suggests BHP expects ore prices to rise later in the decade, when it hopes to control a greater share of the global seaborne trade than it does now.

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With mine layoffs coming, Iron Rangers prepare for hard times – by Dan Kraker (Minnesota Public Radio News – April 22, 2015)

http://www.mprnews.org/

The Iron Range – Every year, Doug Ellis sells hundreds of pairs of expensive steel-toed boots to miners, and a lot of hunting rifles.

“My business is built on mining money,” said Ellis, who owns the Virginia Surplus sporting goods store. “It’s what drives all these towns.” Ellis has operated the store in Virginia for 25 years, through three downturns in the mining industry.

People on the Iron Range are used to the booms and busts of the cyclical mining industry. But the latest downturn has Ellis and many others worried. They’re bracing for the impending layoffs of 1,100 mineworkers later this spring. The job losses likely will significantly affect a regional economy that relies heavily on mining.

The loss of 1,100 jobs on the Iron Range might not seem like much compared to the 3,100 jobs that Target eliminated in the Twin Cities last month.

But in a region where mining makes up about 30 percent of the economy, the impact of the layoffs is enormous, said John Arbogast, vice president of the United Steelworkers union Local 1938 at Minntac in Mountain Iron. “On the Iron Range, mining is everything,” Arbogast said.

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Flickers of life in West Australian mining towns even as iron ore’s profits dim – by Calla Wahlquist (The Guardian – April 21, 2015)

http://www.theguardian.com/international

Some towns have gone, but others have diversified from iron ore to cattle farming and new businesses

Three hours from the centre of Western Australia’s iron ore industry, a scrubby patch of ground stands as a reminder of what happens to mining towns when the money moves on.

The patchy outline of a football oval is all that’s left of the town of Shay Gap, which once had a population of 650. Lang Coppin, an East Pilbara shire councillor whose family runs Yarrie Station, where the town was built, can spot it when he flies over the area in his helicopter – but that’s only because he knows where to look.

“You will drive past there now and if you didn’t know where the town was you wouldn’t believe it,” Coppin said. “You wouldn’t know you went past a town that once had schools, football ovals, shops.”

Founded by Mount Goldsworthy Mining Associates in the early 70s as a worker hub for nearby iron ore operations, Shay Gap closed two months after the mine ceased operation in February 1994.

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Iron ore price crash erases $74b in market value – by Tess Ingram (Sydney Morning Herald – April 20, 2015)

http://www.smh.com.au/

The plummeting iron ore price has wiped $74 billion from the value of Australia’s key iron ore mining stocks since January 2014, and analysts expect share prices to continue their decline as the price for the commodity slides.

Investors that held on to the stocks while the price for iron ore sank during the past 15 months are now nursing losses in value of as much as 92 per cent.

Together, BHP Billiton, Rio Tinto, Fortescue Metals Group, Mount Gibson Iron, Atlas Iron, BC Iron, Arrium and Grange Resources suffered enormously as ore prices slumped 60 per cent from $US134 a tonne in January 2014 to $US50.93 a tonne on Friday.

A combined $73.7 billion, or 22 per cent of value, has been erased from their market capitalisations since January 2, 2014.

Excluding the diversified big miners, BHP Billiton and Rio Tinto, the combined market value of the six remaining companies has declined 71 per cent or $17.2 billion.

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World’s Lowest Cost Iron Ore Miner Turns Screw on Rivals – by Jesse Riseborough (Bloomberg News – April 17, 2015)

http://www.bloomberg.com/

Rio Tinto Group Chief Executive Officer Sam Walsh is fast becoming the worst nightmare of rival iron-ore producers starved of cash.

Iron ore prices have slumped by more than half in a year on a deepening global supply glut. That’s pushed some into bankruptcy and left others on life support. News that the lowest-cost producer is mining a ton of ore even more cheaply signals a more protracted price slump.

After achieving an industry-leading $19.50 a ton last year, currency movements and a drop in fuel costs mean Rio Tinto is now producing at $17, Walsh told investors in London on Thursday. The company is still seeking ways to ship it to Asian buyers more cheaply, he said.

“I know there’s a lot of controversy,” Walsh said. “I know that there’s a lot of late entries into the market who have taken advantage of higher prices and they are now feeling the impact of that as prices have come down. ‘‘This is rational, normal economics,’’ he said. ‘‘This is what physically happens across a range of commodities not just iron ore. It’s a process that we and others have got to work through.’’

The strategy, employed by the world’s largest producers, of continuing to expand output in the face of a price rout has earned the ire of some analysts, investors and loss-making rivals. Rio’s main competitor BHP Billiton Ltd. has described the tactic as ‘‘squeezing the lemon.”

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Activist leads America’s biggest iron miner out of Ring of Fire, but not danger – by Stephen Gandel (Fortune Magazine – April 16, 2015)

https://fortune.com/

Hedge fund Casablanca Capital took over mining company Cliffs Natural eight months ago. So far, it’s not going so well.

These days, activist investors paint themselves as Wall Street’s turnaround specialists. Activists’ track record at getting companies to boost their share buyback programs, hand over board seats, or put themselves up for sale has been impressive. But when it comes to actually turning around a troubled company, or steering a company away from trouble, the jury on activism is still out.

Last July, activist hedge fund Casablanca Capital won control of the board of mining company Cliffs Natural Resources CLF -3.63% after a six-month proxy fight. Days later, the hedge fund installed a new CEO and said that it had a new strategy to increase shareholder value. Eight-and-a-half months later, Cliffs’ stock has plunged 69%. So much for increasing shareholder value.

To be sure, Casablanca’s biggest problem has been commodities prices, which are out of the hedge fund’s control. Cliffs is the largest U.S. miner of iron. And iron prices in 2014 fell nearly 50% in 2014. That drop has taken Cliffs’ cashflow with it.

But Cliffs was also over leveraged. And it may have tried to do too much too soon. The hedge fund may have also underestimated how hard it would be to compete against its larger and more diversified competitors, such as Rio Tinta Group and BHP Billiton.

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Australia steeled for China slowdown as iron ore prices fall – by Jamie Smyth (Financial Times – April 16, 2015)

http://www.ft.com/home/us

Sydney – The last time Western Australia was engaged in a dispute with Canberra of this magnitude, it threatened to secede during a financial crisis sparked by the 1930s Depression.

The current friction is linked to China’s slowdown — a sign of how closely Australia’s fortunes are tied to Beijing’s appetite for its commodity exports.

“It’s not secession but it is tension and disengagement,” Colin Barnett, Western Australia’s premier, said this week when Canberra and other states rejected a request to help plug a widening hole in the state budget caused by plunging iron ore prices.

Western Australia is a mining state that enjoyed a decade-long boom selling iron ore — a key ingredient in steel — to China. Known by some as “China’s quarry”, the state hosts BHP Billiton, Rio Tinto and Fortescue Metals Group, which have spent billions of dollars building mines, railways and ports to almost double iron ore production to 717m tonnes over the past five years.

But just as global supply hits record levels, China’s economy is slowing and its desire for the reddish-brown ore may have plateaued.

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NEWS RELEASE: Mining vs. Aboriginal Rights in Canada – Rio Tinto told to pay its rent to the Innu People

LONDON, UK, April 16, 2015 /CNW Telbec/ – Three First Nations chiefs, dressed in traditional garb and aware of the historic nature of their action, have come to London to address the shareholders of mining giant Rio Tinto directly during their annual general meeting in today, April 16, 2015. On the floor of the meeting, they asked Rio Tinto’s president and CEO, Sam Walsh, and its board of directors to intervene to end a longstanding conflict between the Innu Nation in Quebec, Canada, and mining company IOC, majority owned by Rio Tinto.

Inspired by Midnight Oil’s Beds Are Burning, a political song demanding the return to Australian aboriginals of ancestral lands stolen 200 years earlier by British colonists, the Innu chiefs informed Rio Tinto that “it’s time to pay the rent,” 60 years after exploitation of their territory began.

Supported by international law recognizing that indigenous peoples have rights—notably free, prior and informed consent—the Innu chiefs wanted to inform Rio Tinto shareholders that they can shed light on the negligence of IOC in Canada.

The Innu chiefs sought to inform Rio Tinto shareholders that there is specific legal precedent in Canada, where a recent Supreme Court ruling recognized the existence of First Nations ancestral title and stated that Aboriginal peoples holding this title, including the Innu of Quebec, “have the right to the benefits associated with the land—to use it, enjoy it and profit from its economic development” (excerpt from the ruling).

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UPDATE 1-Apart from Big 3, iron ore miners face ‘existential’ threat – Goldman – by Manolo Serapio Jr (Reuters U.S. – April 16, 2015)

http://www.reuters.com/

SINGAPORE, April 16 (Reuters) – Up to half of iron ore output by miners outside the three mega producers in Australia and Brazil is at risk of closure with global demand set to peak at about 1.4 billion tonnes next year, Goldman Sachs said.

Production volumes among top miners – Vale, Rio Tinto and BHP Billiton – was not at risk, the bank said. “However, the rest of the industry is now facing an existential challenge,” Goldman analysts Christian Lelong and Amber Cai said in a report.

“We expect seaborne iron ore demand to peak in 2016 as the displacement of marginal Chinese iron ore production fails to offset a contraction in domestic steel consumption,” they said.

Separately, Moody’s Investors Service said supply reductions were dwarfed by planned increases estimated to exceed 300 million tonnes over the next several years.

Goldman cut its 2015 iron ore price estimate by 18 percent to $52 a tonne. It forecast $44 in 2016 and $40 in 2017 and 2018, down 29-33 percent from previous estimates. The price could drop to $40 this year and next, based on Moody’s estimates.

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