ANZ sees iron ore under $US60

Resources Corner

by Lelde Smitts

ANZ has lowered its forecast of the iron ore price from $US77 to below $US60. It’s a dire forecast made by Mark Pervan, ANZ Head of Commodity Research, and its made life even tougher for iron ore producers fighting for survival as iron ore floods the market and demand shrinks. 
 
Amid plunging commodity prices Rio Tinto has seen its profits and earnings fall but it has boosted its dividend and announced a $US2 billion share buyback in the 2014 full year. Newcrest Mining has posted a first half profit of $200 million and all operations are generating positive free cash flows. While Bradken has admitted a 64 per cent plunge in underlying profit for the first half as revenues dropped 12 per cent.
 
Commentary
 
A note out this week from ANZ estimates spot iron ore prices have dropped 60 per cent in the past 12 months. This was balanced with a view that 85 per cent of the sea-borne market are still making money. ANZ has tempered its forecast for the next two years estimating the glut of supply will remain with prices not beginning to firm until 2018. 
 
ANZ blue notes have been the bearer of bad news in the past with a November 2014 report titled “Iron ore will never recover former peaks”. 
 
Results are in...
 
Rio Tinto Limited (ASX:RIO) has seen its profits and earnings fall but it has boosted its dividend and announced a $US2 billion share buyback in the 2014 full year. The miner showed underlying earnings of $US9.3 billion, down from $US10.2 billion the year before blaming falling commodities prices and a tough operating environment.
 
Newcrest Mining Limited (ASX:NCM) has posted a first half profit of $200 million and all operations are generating positive free cash flows. While the gold miner’s statutory result is a gain, the underlying result is a slight dip and comes in just below analyst’s expectations.
 
Coffey International Limited (ASX: COF) half year results produced a profit of just $1 million and revealed an 8 per cent drop in geoservices revenue compared to the same period last year. The company is suffering in a difficult market following the slowdown in the resource sector however results are improving slightly from the second half of the 2014 financial year.
 
Bradken Limited (ASX:BKN) has admitted a 64 per cent plunge in underlying profit for the first half as revenues dropped 12 per cent. Declines in commodity prices and reduced spending by miners as well as the drop in the exchange rate have all added to the woes of the mining services group which also declined to pay a dividend after incurring its first ever net loss ending $93 million in the red for the six month period. 
 
Whitehaven Coal (ASX:WHC) has extended its first half net loss by more than 500 per cent to hit $77.9 million for the 6 months to end of December. The coal miner says the loss included $65.4 million in significant items after tax.
 
Striking gold
 
Genesis Minerals Limited (ASX:GMD) says it has confirmed significant shallow oxide gold resources at its Viking Gold Project in Western Australia. Genesis owns 100 per cent of the tenements after paying AngloGold Ashanti Limited (ASX:AGG) $50,000 for the project along with a deferred payment of $2 per measured ounce of gold. 
 
Expansion
 
Agrimin Limited (ASX:AMN) has been granted key tenements for its Mackay Project in a fast tracked process. The company is now moving ahead with the approvals process to begin on-ground exploration. Four of the five tenements which cover nearly 2,500 square km of Lake Mackay in Western Australia have been allowed with the fifth and final tenement expected within months.
 
Boosting production
 
BC Iron Limited (ASX:BCI) has release its quarterly production figures showing the Nullagine Joint Venture has pushed back to a run rate of 6Mtpa during November and December. The iron ore miner says cost cutting was a focus and guidance for the remainder of the financial year sees all-in costs at between $54-$61 per wmt.
 
Shares in Fortescue Metals Group Limited (ASX:FMG) jumped on second quarter production growing by 36 per cent and coming in within guidance. The iron ore miner extracted 43.6 million tonnes of ore in the quarter which puts it on track to achieve its full year target of between 155 and 160 million tonnes.
 
OZ Minerals Limited (ASX:OZL) has beaten its annual output forecast and launched a strategic review to take on what it describes as a ‘changing resources sector’.  The mining company produced 92,615 tonnes of copper over last year, beating the guidance range of between 85,000 to 90,000 tonnes.
 
Newcrest Mining Limited (ASX:NCM) has boosted its annual output forecast after achieving a better than expected result in the three months to the end of December. Australia’s largest listed gold miner produced 577,110 ounces of gold and 25,508 tonnes of copper in the second quarter of its financial year.