Fortescue Metals Group Founder Betting on China to Boost Iron Ore Market
As iron ore prices continue to decline, Fortescue Metals Group Founder Andrew Forrest is betting on China to boost the market. The owner believes iron ore demand will increase over the long term as China begins urbanizing.
According to Bloomberg, roughly 600 cities in China, each of which contains 10 million people, will be constructed over the next 30 years. The shift is expected to boost demand for construction materials, cars and appliances, which will entice ore imports as mining companies ramp up output.
The price of the steel ingredient has declined steeply in the past year, deepening as a global surplus expands. Goldman Sachs Group Inc. declared last week the “end of the Iron Age” and said prices are unlikely to recover.
“Our operating costs into China are about, you know, the mid-$40s to late-$40s, Rio Tinto is about the same, BHP is about the same,” Forrest said. Even with “iron ore prices at $70 or $80, we’re sleeping easily,” he added.
According to Wayne Calder, deputy executive director at the Canberra-based Bureau of Resources and Energy Economics, iron ore may average $90 to $95 a ton over the next five years.
Shares of Fortescue Metal Group have struggled recently falling 4.33 percent to $3.76 on Friday. The iron ore producer’s share have fallen by 36 percent since the beginning of the year.
Vale invests $150mn to extend life of Manitoba operations
Vale has announced a $150mn CAD investment to extend current mining activities in Thompson, Manitoba by 10 years while aggressive exploration drilling of known orebodies holds the promise of mining well past 2040.
Global energy transition is boosting the market for nickel
The Thompson Mine Expansion is a two-phase project. The announcement represents Phase 1 and includes critical infrastructure such as new ventilation raises and fans, increased backfill capacity and additional power distribution. The changes are forecast to improve current production by 30%.
“This is the largest single investment we have made in our Thompson operations in the past two decades,” said Mark Travers, Executive Vice-President for Base Metals with Vale. “It is significant news for our employees, for the Thompson community and for the Province of Manitoba.
“The global movement to electric vehicles, renewable energies and carbon reduction has shone a welcome spotlight on nickel – positioning the metal we mine as a key contributor to a greener future and boosting world demand. We are proud that Thompson can be part of that future and part of the low carbon solution.”
Vale continues drilling program at Manitoba
Coupled with today’s announcement, Vale is continuing an extensive drilling program to further define known orebodies and search for new mineralization.
“This $150mn investment is just one part of our ambitious Thompson turnaround story. It is an indicator of our confidence in a long future for the Thompson operations,” added Dino Otranto, Chief Operating Officer for Vale’s North Atlantic Base Metals operations.
“Active collaboration between our design team, technical services, USW Local 6166, and our entire Thompson workforce has delivered a safe, efficient and fit-for-purpose plan that will enable us to extract the Thompson nickel resources for many years to come.”
The Thompson orebody was first discovered in 1956 by Vale (then known as Inco) following the adoption of new exploration technology and the largest exploration program to-date in the company’s history. Mining of the Thompson orebody began in 1961.
“We see the lighting of a path forward to a sustainable and prosperous future for Vale Base Metals in Manitoba,” said Gary Annett, General Manager of Vale’s Manitoba Operations.