FMG signs landmark deal to create Australia’s first Aboriginal owned and operated iron ore mine
Fortescue Metals Group is trying something new. The iron ore miner announced earlier this week it had struck a deal with Australian Aboriginal Mining Corporation Pty Ltd (AAMC) to create the country’s first Aboriginal owned and operated iron ore mine.
“Today’s agreement underlines very clearly Fortescue’s commitment to provide meaningful opportunities for Aboriginal business development. The company is focused on building up Aboriginal communities through full economic participation rather than passive welfare,” said Fortescue CEO Nev Power.
The five-year “Iron Ore Sale and Purchase Agreement” will allow AAMC to transport upwards of two million tons of iron ore annually from its Pilbara mining operations through Fortescue’s port or rail facilities. The deal gives FMG the option to either purchase iron ore directly from AAMC or act as an agent on behalf of the company to sell it.
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AAMC chairman, Daniel Tucker, described the deal as, "an important step for the continued advancement of Aboriginal peoples in the Pilbara that will see them sharing in the wealth that is generated on their traditional lands."
According to Tucker, the mine development for AMMC hinges on the price of iron ore and the company would develop projects, “as soon as the prevailing commercial environment is supportive.” Iron ore is currently hovering around $55 a ton.
"If they can't get it going at that price, obviously they have quite a few costs to get over," said resource analyst Treadgold.
"They probably need a US dollar price in the $70 to $80 range, to arrange the funding to develop the mine.
"So there are hurdles to clear, they need capital to develop the mine.
"It looks like FMG will be providing a lot of the essential services, so it is a deal that can happen but it has a way to go."
Treadgold added, "It is a socially important announcement, not a financially important announcement.
With a workforce comprised of 13 percent Aboriginal, with another 1000 Aboriginal people working for the company as a contractor, Fortescue Metals Group is actively involved in incorporating Aboriginal people into mining. The company also recently launched a new program called "Trade Up" to further increase the number of qualified Aboriginal people in its workforce.
Global iron ore production to recover by 5.1% in 2021
Global iron ore production fell by 3% to 2.2bnt in 2020. Global production is expected to grow at a compound annual growth rate (CAGR) of 3.7% to 2,663.4Mt between 2021 to 2025. The key contributors to this grow will be Brazil (6.2%), South Africa (4.1%), Australia (3.2%) and India (2.9%). Key upcoming projects expected to commence operations include South Flank in Australia (2021), Zulti in South Africa (H2 2021), Serrote Da Laje in Brazil (H2 2021) and Gudai-Darri (2022), according to GlobalData, a leading data and analytics company.
Vinneth Bajaj, Associate Project Manager at GlobalData, comments: “Declines from Brazil and India were major contributors to the reduced output in 2020. Combined production from these two countries fell from a collective 638.2Mt in 2019 to an estimated 591.1Mt in 2020. The reduced output from the iron ore giant, Vale, was the key factor behind Brazil’s reduced output, while delays in the auctioning of mines in Odisha affected India’s output in 2020.
“Miners in Australia were relatively unaffected by COVID-19 due to effective measures adopted by the Australian Government, while a speedy recovery in China led to a significant 10.4% increase in the country’s iron ore output.”
Looking ahead, the global iron ore production is expected to increase by 111.3Mt to 2,302.5Mt in 2021. Rio Tinto is expected to produce up to 340Mt of iron ore, while BHP has released production guidance of 245–255Mt, supported by the start of the Samarco project in December, which is expected to produce between 1–2Mt.The company has retained its guidance for Australian mines at 276–286Mt on a 100% basis, due to scheduled maintenance work at its ore handling plant and tie-in activity at the Area C mine and South-Flank mine.
Bajaj added: “The remaining companies are expected to produce more than 600Mt of iron ore, including FMG, whose production is expected to range between 175–180Mt supported by its Eliwana mine that commenced operations in late December 2020, and Anglo American, which is expecting to produce between 64–67Mt. Vale is expected to resume 40Mt of its production capacity, taking its overall production capacity to 350Mt in 2021, with production guidance of 315-335Mt.”