Iron ore’s still heading south while at the same time BHP and Rio have reported record shipments of the steel making commodity. We’ve spoken in the past about how a glut of ore on the market is pushing prices lower and now, with half year production reports from the major players, it’s clear that a lot of small and mid tier ore miners will have to dramatically cut costs, be acquired by the big guys if they are to stay in business.
BHP Billiton improved iron ore production by 16 per cent to 113.43 million tonnes in the first half of the 2015 financial year while Rio Tinto beat its own guidance and achieved better than expected iron ore output and shipment growth over the 2014 calendar year. Atlas Iron concedes it’s been a tough year and that it will be cutting costs by $25 million while Arrium will mothball its Southern Iron mining operation.
Economic News
The iron ore price neared a five year low this week with ore for immediate delivery to China hovering above $US66 a tonne. China’s GDP growth for 2014 came in slower than in previous years but it was ahead of expectations at 7.4 per cent. China’s demand for ore is slowing and its having an immense impact on Aussie miners.
Production reports
BHP Billiton Limited
(ASX:BHP) has improved iron ore production by 16 per cent to 113.43 million tonnes in the first half of the 2015 financial year. Australia’s largest company boosted group production by 9 per cent over the six month period with records achieved for eight operations and five commodities. Metallurgical coal production grew 21 per cent, petroleum production gained 9 per cent to a record and records were also achieved with manganese ore and alumina production. CEO Andrew Mackenzie says BHP is cutting costs and improving operating and capital productivity to help mitigate some of the impact of lower commodity prices.
Rio Tinto Limited
(ASX:RIO) has beaten its own guidance and achieved better than expected iron ore output and shipment growth over the 2014 calendar year. The mining giant reports annual global iron ore output climbed 11 per cent to 295.4 million tonnes and shipments rose 17 per cent to 302.6 million tonnes.
Atlas Iron Limited
(ASX:AGO) has shipped higher volumes than its guidance anticipated for the December quarter amid challenging conditions and falling average prices for iron ore. The Pilbara miner says it will cut capital expenditure for the financial year by $25 million, to $69 million.
St Barbara Limited
(ASX:SBM) has seen its shares gain as it announces a turnaround in production for the December quarter. The mining company says its Leonora gold mine in WA produced record number of ounces in the quarter. In December the Simberi operations in PNG reported its first month of positive net cash flows since acquisition.
Iluka Resources Limited
(ASX:ILU) has posted sinking output and revenues over the 2014 calendar year. The Australian based minerals sands producer has shown total mineral sands production dropped 14.7 per cent to just over 900 tonnes. Excluding the impact of ilmenite production of zircon, rutile and synthetic rutile rose 13.5 per cent to almost 535 tonnes.
Whitehaven Coal Limited
(ASX:WHC) has reported a drop in output and sales in the second quarter of the 2015 financial year. The mining company’s quarterly saleable coal production fell 17 per cent to 2.4 million tonnes and total sales fell 7 per cent to 2.95 million tonnes.
Spending cuts
PanAust Limited
(ASX:PNA) has revealed a round of job cuts as the price of copper sinks to five-year lows. The miner plans to slash its workforce by almost 5 per cent through 182 job cuts across the business. PanAust expects the changes to results in an annual operating cost reduction of about $US15.5 million.
Cape Lambert Resources Limited
(ASX:CFE) is putting a knife to costs. The resource and investment company says it has instituted a range of cost reduction measures expected to generate savings of about $3.5 million per annum. Among the measures 117 full time jobs will be slashed, exploration expenditure will be cut and some non-core assets will be placed on care and maintenance.
Iron ore miner Arrium Limited
(ASX:ARI) will mothball its Southern Iron mining operation in a bid to control costs as ore prices continue to slide. The company says the mine is a higher cost operation and that it will focus its efforts on its lower cost Middleback ranges operation.
M&A
Amex Resources Limited
(ASX:AXZ) says it has terminated a US$100 million contract its signed with MCC Overseas for the design and construction of its MBA Delta iron sands project in Fiji. The deal, signed in December 2013 is in default as MCCO was unable to raise US$80 million in funding arrangements to complete its contractual commitments. Works required were also not completed and Amex has decided to part ways and seek alternative arrangements for the project. A US$20 million advance payment is required to be repaid by MCCO.
Australian gold producer Norton Gold Fields Limited
(ASX:NGF) has advised it is mulling a takeover bid from its majority shareholder Zijin Mining Group Co. The indicative, conditional and non-binding proposal is valued at $0.20 per share, compared to its last closing price of $0.145. Norton Gold has appointed a committee comprising of independent directors to consider the proposal, and, intends to make a further announcement as and when required.
Iluka Resources Limited
(ASX:ILU) has confirmed it is in ongoing talks with Dublin-based mining company Kenmare Resources. The companies have been in continued contact since the original announcement on 17 October last year. Iluka has conducted several visits to Kenmare offices and the miner’s main asset Moma Titanium Minerals Mine in north east Mozambique. Due diligence is well progressed but no deal has yet been agreed upon.
Growth
Shares in Syrah Resources Limited
(ASX:SYR) have jumped on news its graphite anodes offer superior performance to other manufacturers. The resources explorer says its spherical graphite, suitable for use in lithium ion batteries, has been tested by Japanese battery producers which showed higher performance than typical Chinese natural anodes.
Fortescue Metal Group Limited
(ASX:FMG) says it has upgraded the expected mineral resource base in the Chichester Ranges in Western Australia. More than 300 million tonnes have been added to estimates of the known mineral resources including those at Cloudbreak and Christmas Creek. The resources are at or near the surface and are expected to be easily and cheaply extracted. A new mineral resource has also been identified 35 km southeast of Christmas Creek and drilling and exploration activities continue there.
Striking gold
Following on from its record quarterly output report last week junior gold miner Ramelius Resources Limited
(ASX:RMS) says it has intersected high grade gold at its Blackman’s project in Mount Magnet, Western Australia. Ramelius has recently secured the remaining 25 per cent of the Blackman’s Mining Lease giving it 100 per cent equity in the project.
Shares in Ramelius Resources Limited
(ASX:RMS) jumped more than 30 per cent in morning trade after reporting record quarterly output results. The gold miner says it exceeded gold production guidance by 13 per cent in the December quarter and cash and gold on hand lifted 49 per cent in the second half of the year.
