Fortunes follow yo-yo cycle

The volatile iron ore price may have prompted reduced investment but many miners remain on track.

A RECENT strengthening in iron ore prices has lifted spirits in the Western Australian industry, with those riding out the wave of low prices reporting positive activity.

While some miners took this year’s reduced iron ore price, which reached a low of $US90/ tonne in September, as a sign to reduce spending, positive stories are emerging from others that have continued to invest.

The price has now rebounded to around $US120/t, prompting some to reconsider decisions to slash spending.

But it hasn’t been enough for the likes of Jupiter Mines, which announced a decision to freeze spending on its Mount Ida project in the Yilgam region. Not only have preliminary capital and operating cost estimates proved conservative, but the strong dollar and low commodity price overall has made the project apparently unfeasible in the current climate.

That news came alongside the revelation that Mtsubishi was effectively turning its back on the Oakajee Port and Rail project, which now has an estimated cost upwards of $10 billion.

While Mtsubishi insists it is not abandoning Oakajee completely, the Japanese giant is shifting its focus to progressing work on its Jack Hills mine after months of failing to secure a joint venture partner.

Mount Gibson is another operating with its handbrake on, having reduced activity at all its facilities during the past month. The decision is expected to achieve cost savings of 80 per cent at the expense of 270 jobs.

The miner’s back-up plan for combating the low iron ore prices includes supplementing income through the sale of about 2 million tonnes of stockpiled ore.

Meanwhile, Aquila Resources is reassessing its options after a budget blowout; revised capital and operating costs of its West Pilbara Iron Ore project have revealed an escalated cost of $7.4 billion. As a consequence, it’s considering outsourcing infrastructure and services contracts, which could save the company $2.4 billion in capital expenditure.

Not all operators are taking such a cautious approach, however.

Gindalbie Metals’ efforts to get its Karara project near Geraldton off the ground are now coming to fruition, with the project having achieved its first magnetite production.

Over the next six months Gindalbie, operating in joint venture with Chinese steel producer AnSteel, is planning to ramp up production to an annualised rate of 8mt.

Atlas Iron has also reported positive activity and says it’s on track to reach exports of lOmtpa by June 2013. The company also says it has made significant progress to reach its longer-term production target of 46mtpa through the securing of environmental approvals for mines in the southeast Pilbara and associated rail spur options.

Brockman Resources and Iron Ore Holdings are also making their mark. Brockman has released its first development timetable for the Marillana project in the East Pilbara, which sets 2016 as the target for first production.

Brockman has taken initial steps for securing a route to market through a joint evaluation of an integrated mine, rail and port logistics systems with QR National and Atlas.

Iron Ore Holdings is also assessing ways to get product from its planned 8mtpa Buckland project to market. It has signed a memorandum of understanding with the Dampier Port Authority, defining principles for the location and potential development of a barge loading facility.

At the larger end of town the big names appear to be confident, with contingency plans put in place after a flurry of cut backs and ‘slowed expenditure’ in recent months.

Rio Tinto is continuing with its expansion plan to achieve output of 353mtpa by 2015 - making it an anomaly among its peers, which have generally reduced activity.

Rio Tinto Australia managing director David Peever told a recent conference in Perth the company was in a good position to take advantage of the future market, which would encounter less supply as the effects of its competitors’ cutbacks became apparent.

BHP Billiton iron ore president Jimmy Wilson told the same conference all his company’s major projects were on track and within budget, excluding the outer harbour expansion on which BHP halted expenditure in August.

The company is now eyeing output of220mtpa by the end of the year and focusing on making the most of its inner-harbour facility for future exports. A revision of the inner-harbour capacity has found the potential to ship substantially more than the initial 240mtpa assumed capacity.

Hancock Prospecting has also portrayed renewed confidence in securing about $7 billion in debt to help fund its Roy Hill mine with first production planned for 2015.

Fortescue Metals Group is taking the most optimistic view of the recent recovery in iron ore prices, which have rebounded from a low of around $US90/t in September to around the $US120/t mark.

It has prompted FMG to hint that its decision in September to shelve $US1.6 billion in spending could be reversed.

Managing director Nev Power has indicated the company is looking increasingly likely to revive the Kings mine project.

“At this stage, where the iron ore price is, above $US120 a tonne, I’m very confident we will be able to do that,” Mr Power said following the company’s annual general meeting.

“It’s looking very promising.”

Iron ore plays

Rio Tinto - Continuing with expansion to 353mtpa by 2015. Australia managing director David Peever last week reaffirmed the company’s consideration of the project as a Tier One’ asset in which Rio Tinto would continue to invest.

BHP Billiton - Need for capital cost savings put outer harbour expansion plan for Port Hedland on hold indefinitely - BHP is instead focusing on increasing capacity from inner harbour to more than 240mtpa.

Fortescue Metals Group - Looks to be revisiting its Kings mine project which was shelved in September when iron ore prices hit a three year low. The mine will add 40mtpa to the company’s annual production, taking total output to 155mt per annum.

Atlas Iron - On track to achieve lOmtpa by the end of June 2013 as it achieved a shipping rate of 8.4mtpa in October.

Mount Gibson - Has pulled back on spending with deferral of operations at Koolan Island and reduction of total staff by 270. Looking to maintain production by exploiting current stockpiles.

Gindalbie Metals - Its Karara Mining joint venture has begun six-month ramp up to 8mtpa magnetite production. First commercial shipment expected December-January.

Hancock Prospecting - Moving towards formal financing process for Roy Hill mine which is expected to be completed by mid-next year. Forecasting production for 2015.

Jupiter Mines - Froze spending on its $1.7 billion Mount Ida project indefinitely due to higher estimated capital and operating costs.

Iron Ore Holdings - Moll with Dampier Port Facility for potential barge and port facility which would create a supply chain for the company’s Buckland project.

Mitsubishi - Has cut spending on Oakajee port proposal and cut two thirds of staff while it shifts its focus to progressing the Jack Hills mine.

Brockman Resources - Has announced a development timetable for its Marillana Iron Ore project; targeting first production 2016. It follows a takeover of the company by Wah Nam worth over $800 million.

Aquila Resources - Considering outsourcing infrastructure and services facilities as capital and operating costs for its West Pilbara Iron Ore project escalate to $7.4 billion.

Asia Iron - Development timetable for the Extension Hill magnetite project has been delayed due to political changes in the City of Chonqing where 60 per cent shareholder Chongqing Chonggang Minerals Development Investment Limited operates.