Iron ore rebound returns hope to the industry
The commodity rebounded after a 10 per cent drop just one day earlier, making it the largest single-day fall and rise ever in a 48-hour period. BHP Billiton went up nearly three percent, while Rio Tinto saw a 2.32 percent increase and Fortescue Metals rose 1.68 percent.
This latest development will have a big impact on revenue for both Australia and China, as Australia is the world’s largest supplier of iron ore—which is key to making steel—while China is the Aussie’s top customer.
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Increased supply in recent months along with a decrease in Chinese demand has had iron ore on a steady decline. Even with the latest 10 percent spike, the majority of smaller Aussie miners will still be producing at a loss, forcing many cut costs.
Meanwhile, Rio Tinto believes the long-term market for iron ore is stable and will continue to produce a good amount of revenue in Australia. After providing its second-quarter operations review, Rio noted iron ore production and shipment increased compared to 2014 despite unseasonal, severe weather in Western Australia that included two tropical cyclones that lost about seven million tonnes.
In addition, Rio had record first-half production and sales of 146.3 million tonnes and 146.5 million tonnes respectively from its Pilbara site. The company also expects to increase its production capacity to 340 million tonnes, which would be up 15 percent from 2014, as the company completes key parts of its infrastructure that will support expansion.
“The focus is now to ramp up the new equipment to full capacity and generate maximum value from the integrated system,” said Rio in a statement.
This has led Rio to persuade investors that being the producer with the lowest cost will pay off down the line as higher-cost producers continue to leave the market. The company’s share price goes in line with the spot price of iron ore in Asia, which isn’t a surprise since the commodity makes up about 90 percent of the company’s revenue.
As it is, iron ore producers will continue to be in competition in a shrinking market.
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.