Rio Tinto – Page 32 – Republic of Mining

COLUMN-Any Australian iron ore inquiry won’t solve major issue – by Clyde Russell (Reuters U.S. – May 15, 2015)

May 15, 2015

http://www.reuters.com/

SINGAPORE, May 15 (Reuters) – Any inquiry into the collapse of iron ore prices by the Australian Senate is likely to provide a great opportunity for political point-scoring for a domestic audience, but won’t address the main issue.

It’s still not clear whether independent Senator Nick Xenophon has enough support from the major parties, the ruling Liberals and the opposition Labor, to launch an inquiry, but he did receive backing for the idea from Prime Minister Tony Abbott.

If any inquiry did go ahead, it would provide a platform for Andrew Forrest, the chief executive of No.4 iron ore producer Fortescue Metals Group, to continue his campaign against the expansions of No.2 and No.3 miners, Rio Tinto and BHP Billiton.

Forrest would most likely relish the chance to continue to portray his company as the tough “Aussie battler” being bludgeoned by heartless multinationals that have failed to act in the interests of Australia and its people.

While this sort of attack may play well in the domestic media arena, it’s also likely that any Senate inquiry would find that BHP Billiton and Rio Tinto haven’t done anything illegal in ramping up iron ore output to levels beyond demand growth.

Prime Minister Tony Abbott’s iron ore inquiry slammed – by Peter Ker and Tess Ingram (Sydney Morning Post – May 15, 2015

May 15, 2015

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

A parliamentary inquiry into the iron ore industry would be entirely inappropriate and damage Australia’s international image, former Australian Competition and Consumer Commission chairman Graeme Samuel says.

Speaking after Prime Minister Tony Abbott declared his support for an inquiry into the behaviour of the struggling industry, Mr Samuel said the parliament should not be trying to intervene in a global market.

“I don’t know what parliament thinks it can do, is it going to limit the exports of BHP and Rio Tinto? I can’t imagine what role parliament has in dealing with an international market of this nature,” said Mr Samuel.

“The very reason we have independent competition authorities is to ensure politicians don’t get involved in political situations. This is an attempt to intervene in the market in a way that is entirely innappropriate.”

Mr Samuel’s comments come after ACCC chairman Rod Sims said last month it was “misguided” to think BHP and Rio were engineering the recent price fall.

BHP Rejects Supply Restraint in Iron After Glasenberg Salvo – by Jasmine Ng, Martin Ritchie and Jesse Riseborough (Bloomberg News – May 14, 2015)

May 14, 2015

http://www.bloomberg.com/

BHP Billiton Ltd. defended its strategy of expanding iron ore output into an oversupplied market as prices decline, saying that the company’s approach was rational and it wouldn’t countenance cutting back on output.

“Our performance will be dependent on being the most efficient supplier and it shouldn’t be dependent on supply restraint,” Alan Chirgwin, iron ore marketing vice president, told a conference. “We have high-quality resources. We have a management team that’s operating in a very cost-disciplined way. We should be taking advantage of those things.”

Iron ore slumped 40 percent in the past 12 months as BHP and Rio Tinto Group in Australia and Brazil’s Vale SA expanded low-cost output to boost sales volumes and cut costs, spurring a surplus as China slowed. The strategy drew criticism from rivals including Fortescue Metals Group Ltd. and Glencore Plc, which said that the approach damages the industry. It’s also drawn flak from political leaders including Colin Barnett, the premier of Western Australia where BHP and Rio operate mines.

“What we’re doing very clearly is we’re operating our enterprise in a very economically rational way,” Chirgwin said in Singapore on Thursday. “We took action, so it wasn’t just words. In 2011, that’s the last time our board approved billions of dollars of additional investment in expansion.”

Chinese iron ore mines face ‘annihilation’ as BHP, Rio Tinto, Vale boost output – by Jasmine Ng, Feiwen Rong and Jesse Riseborough (Sydney Morning Herald – May 13, 2015)

May 13, 2015

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

Iron ore production in China is poised to shrink further as cheaper imports and faltering demand threaten to close mines supplying mills in the top steelmaker. Most private mines in China have costs that are too high and produce ore of too low a quality to survive, according to Sanford C Bernstein & Co. Output that fell 20 per cent to 311 million metric tons last year would drop to 271 million tons this year and shrink further next year, Goldman Sachs said.

Iron ore retreated 39 per cent over the past 12 months as Australia’s Rio Tinto and BHP Billiton as well as Brazil’s Vale SA boosted low-cost production to cut costs and protect market share, spurring a glut as China slowed. The outlook for supply, and consequences for miners in China, will be in focus on Thursday as executives from the biggest producers address a conference in Singapore. BHP chief executive officer Andrew Mackenzie warned on Tuesday that lower prices were here to stay.

Georgi Slavov, head of basic resources research at Marex Spectron Group, said in an email: “Mines not part of larger cash or credit line-rich steel groups are facing annihilation. Utilization in China keeps dropping, which means more and more mines are struggling to meet the ends and produce.”

Glencore CEO says rivals’ strategy tipping mining sector into crisis – by Silvia Antonioli (Reuters U.K. – May 12, 2015)

May 12, 2015

http://uk.reuters.com/

LONDON – The head of mining and commodity trading giant Glencore said on Tuesday the strategy of rival companies to oversupply the market regardless of demand had hit the mining sector’s credibility and tipped it into a confidence crisis.

Chief Executive Ivan Glasenberg has criticised competitors such as Anglo-Australian BHP Billiton (BHP.AX) (BLT.L) and Rio Tinto (RIO.L) (RIO.AX) several times for flooding the market with new, low-cost, iron ore supply which critics says has sent prices into a downward spiral.

“The mining sector is suffering a crisis of confidence,” he said in a presentation at an investor conference in Barcelona. “Oversupplying markets regardless of demand is damaging the credibility of the industry,”

He said mining had been the worst performing sector over the last twelve months, with commodity prices, share values and credit ratings all impacted. Investment flow has also weakened and was now about $60 billion below its 2012 peak, when the commodity supercycle turned sour, Glasenberg said.

Iron ore, oil, nickel and thermal coal were the hardest hit commodities in the last year.

Fortescue founder asks Australians to fight Rio, BHP iron ore plans – by James Regan (Reuters U.S. – May 11, 2015)

May 11, 2015

http://www.reuters.com/

SYDNEY – May 11 Fortescue Metals Group Chairman Andrew “Twiggy” Forrest on Monday called on Australians to urge the government to stop expansion plans by iron ore miners Rio Tinto and BHP Billiton, saying they were jeopardizing the economy.

The plea by the billionaire philanthropist and founder of the world’s fourth-biggest iron ore miner was condemned by the national mining lobby, the Minerals Council of Australia, for threatening to set the country on an “interventionist path.”

Forrest has accused Rio and BHP of over-producing to drive out competitors from the $60 billion-a-year Chinese import market despite Fortescue quadrupling its own production in the last seven years.

“These big companies say they must flood the market next year and the year after and the year after even though it will crash the price further,” Forrest said in an editorial in Sydney’s Daily Telegraph. “Every time they say this the price falls again.”

Iron ore prices .IO62-CNI=SI are trading off their lows at $60.50, but still 55-percent under last year’s peak. For every $1 price fall, the Australian economy lost A$800 million ($632 million) in foreign income, according to Forrest.

Vale to divide and conquer by lifting high-grade iron ore output – by James Wilson (Financial Times – May 10, 2015)

May 11, 2015

http://www.ft.com/intl/companies/mining

Vale is keen to build up its supply of higher-quality iron ore in a move that could increase pressure on some rival producers in the global market for the steelmaking commodity.

The Brazilian miner is one of a quartet of companies that dominate the global market in iron ore, where prices have plummeted over the past year as a glut of supply — mainly from Australian producers — has encountered weakening Chinese demand.

Vale’s recent indications that it would be prepared to hold back some supply have helped to arrest the slide in the iron ore price, while underpinning a rally in the company’s shares in the past month.

In an interview Luciano Siani, chief financial officer, did not rule out Vale cutting its growth plans for next year. The miner expects to produce 340m tonnes of iron ore this year and has previously estimated that 2016 output will be 376m tonnes.

However, Mr Siani said Vale would be likely to “push to the fullest” its production of the highest grade of iron ore, which commands a premium price from steelmakers. By contrast Vale would be more likely to “manage” its more “standard” iron ore supplies, he said.

Rio Tinto CEO says iron ore demand still strong in Asia – by Vicky Validakis (Australian Mining – May 4, 2015)

May 4, 2015

http://www.miningaustralia.com.au/home

Rio Tinto CEO Sam Walsh says commodity markets must remain open as debate continues to rage over his company’s iron ore strategy.

Speaking in Seoul, Walsh said when the commodity cycle became tough, there was a temptation to turn inward. “But we must keep our minds and our markets open,” Walsh said.

“There is a temptation to be parochial, to believe that artificial and temporary barriers will alleviate the pain of awkward transition — when to the contrary, being parochial may delay necessary change or amplify the response required.

“We can see such requests and pleas for new barriers, from some in government and some in business.”

While Walsh did not tie his comments directly to iron ore or the company’s Pilbara mines, they came at the same time FMG’s chairman Andrew Forrest had another go at Rio for its plans to ramp up production.

With iron ore prices down to around $US57 a tonne, major miners BHP and Vale announced revised plans to limit some production.

Vale ups stakes in iron ore war – by Stephen Bartholomeusz (The Australian – May 1, 2015)

May 1, 2015

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

Of far greater consequence to Rio Tinto, BHP Billiton and Australia than Andrew Forrest’s complaints about their volume and cost-driven iron ore strategies is what the “other” major seaborne producer does in response to the crash in iron ore prices.

They might be encouraged by the commentary that accompanied Vale’s first-quarter results overnight.

The Brazilian group is the larger of the three major seaborne iron ore producers and is in the midst of an ambitious and expensive ($US17 billion) program to increase its production by 40 per cent, to almost 460 million tonnes a year from last year’s 327 million tonnes.

As with all the other producers, Vale is slashing costs to try to dampen the impact of the dive in iron ore prices and was able to proclaim that, for the first time in its history, cash costs were less than $US20 a tonne. A significant component of the $US13 a tonne reduction in cash costs was a 20 per cent, or $US4.50 a tonne, fall in freight costs.

Vale has traditionally been competitive with Rio (RIO) and BHP (BHP) in production costs and its ore is generally of higher quality. Its disadvantage has been distance from China and the impact that freight costs have had on its landed costs.

Rio Signals Ready to Step Up on Dealmaking as Market Bottoms – by David Stringer (Bloomberg News – May 1, 2015)

May 1, 2015

http://www.bloomberg.com/

With the mining sector seen nearing the bottom of the cycle, Rio Tinto Group signaled to analysts it’s ready to resume mergers and acquisitions.

The company is prepared to look for a deal if it can secure the right asset at the correct valuation and win investor backing, Morgan Stanley said after an analysts’ meeting this week with Chief Financial Officer Chris Lynch.

An acquisition would be Rio’s first since 2012, according to data compiled by Bloomberg. As asset valuations get pushed lower, larger producers may be changing their attitude toward deals, according to Argo Investments Ltd.

“If they can buy tier-one assets at valuations that are closer to the bottom of the cycle, then that’s not a stupid thing to do,” said Jason Beddow, chief executive officer of Argo Investments, which manages about A$5 billion ($4 billion) in Australia and holds Rio shares.

The value of completed mining deals fell in 2014 to $51.3 billion, the lowest annual total in 10 years, according to data compiled by Bloomberg.

Iron ore wars get personal as Rio tells Fortescue to get its house in order – by Michael Smith (Australian Financial Review – April 30, 2015)

May 1, 2015

http://www.afr.com/

Fortescue Metals founder Andrew Forrest has not been shy about telling Rio Tinto and BHP Billiton how to run their iron ore operations. Rio Tinto’s iron ore boss Andrew Harding is now offering Forrest some advice of his own: get your own house in order and leave us alone.

“The response to that is to fix your own business – not give business advice to others, and definitely not create an environment in Australia where this long-term strategy, which is good for the country, and good for the company, is cast into question,” Harding said in an interview with The Australian Financial Review.

The comments highlight the growing tension between the nation’s three big iron ore producers as the debate about how to manage supply and demand in a low-price environment spills over into the political arena.

It is not the first time Harding has defended the strategy to run the company’s mines at full capacity. But the campaign on both sides is intensifying and becoming more personal.

Harding has made it clear Rio Tinto is not going to blink. He doesn’t believe BHP Billiton has either, despite some contrary interpretations of last week’s decision to defer infrastructure spending at Port Hedland.

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

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.

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

April 27, 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.

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

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.

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

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.