Will the iron ore price resurgence last?
The price of iron has almost doubled since a December low of $38 a ton to around $70 in quick time, although market analysts are warning mining companies that the resurgence may not last as long as they hoped.
Large iron ore producers such as BHP Billiton have revised profit forecasts as margins widen, a big sigh of relief after periods of value decline.
However, experts are predicting that the current price may be as good as it gets, pointing towards the seasonality of the iron ore sector. Big markets including Australia, Brazil and China are all coming out of seasonal climatic difficulties caused by monsoon rains/storms in the southern hemisphere and a harsh winter in China.
According to ABC news in Australia, UBS commodity analysts have said: "For now commodity exposed miners are breathing a little easier. But for price upside to be sustained, better underlying demand is needed.
"There have been green shoots in China's property market, infrastructure activity has lifted & policy makers have signalled a more pro-growth stance. But we are yet to be persuaded and await further evidence before adopting a more positive stance."
The recent surge in Chinese demand is largely debt-funded, which could lead to larger problems in the medium-longer term. Other analysts warn of a massive iron ore surplus if demand for steel drops after the expected Chinese summer building boom.
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.