Iron ore prices fall into danger zone
The nightmare for iron ore just won’t end as prices for the steel-making ingredient have now fallen below $50 a ton, the first time since April 16.
According to Metal Bulletin Ltd, ore with 62 percent content deliver to Quingdao sank 5.1 percent to $49.60 a dry ton on Tuesday. The index has now fallen for the ninth consecutive days, the longest losing streak since August 18 to 29 last year.
Swiss investment house UBS believes the demand for steel in China has peaked and prices will dip as low as $45 a ton in the second half of 2015.
• Related content: Top 10 Iron ore producers based on 2015 guidance
"We think that there's been too much construction of residential apartments in China," said UBS global commodity analyst Daniel Morgan, who believes extra supply coming to the market later this year will continue to push down prices.
"We've got Roy Hill coming to the market in the second half of early next year, so we think there's a bit of a short-term uplift and it should fade from here.”
Nothing left to cut
The last few months has seen the majority of iron ore mining companies desperately making cuts to reduce operating costs in order to push their break-even price as low as possible. While the last few months has given most miners, including Atlas Iron, breathing room with prices hovering above $60 a ton, many analysts agree it won’t last long.
Earlier this year, Atlas Iron briefly suspended operations at some of its mines when iron ore prices hit $46 a ton. With some assistance from its contractors, the miner was able to resume operations the following month.
David Flanagan, chief executive officer of Atlas Iron told shareholders last month the company could now ride out iron ore prices as low as $45 a ton. Before the shutdown, its break-even price was around $60 a ton. Through its agreement with its contractors, this has been lowered to around $US50 a ton.
USB estimates of break-even prices of BC Iron at $52 a ton, Mount Gibson at $49, and Fortescue Metals Group at $44 a ton.
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.