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Categories : Australia, DeBeers, Environment, Fortescue, Good reads
I have been following mining events more closely and this week it appears that a number of topics covered in previous entries have evolved to a significant extent. I am summarizing those in the present list post.
In a rare alignment of activists and large corporations’ mindset, Fortescue is once again sharing its beliefs in the conspirationists leanings of the Australian Government and the Super Majors. Mining
Rarely said about taxation. Well done Zambia. Financial Post
Steady progress is reported on Nautilus Minerals’ Solwara 1, its marine copper and gold mining project in the Bismark Sea (Papua New Guinea). Production should begin in late 2013. Mining
The Oppenheimers swapping diamonds for property development? Botswana Guardian (listen to an interview with Nicky Oppenheimer on Mineweb)
Forces at Play in Afghanistan’s resource extraction race. AFP
On the issue of mine waste. Infomine
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Categories : BHP Billiton, China, Fortescue, Rio Tinto
Australia’s ABC Television Four Corners program revealed that BHP Billiton, Rio Tinto and Fortescue Metals have been the target of Chinese cyber attacks. An attack against Rio Tinto coincided with Stern Hu’s arrest last July. BHP Billiton was attacked during its attempted takeover of Rio Tinto. As for Fortescue Metals, news of the attack are a bit surprising as the company has struck deals in terms favourable to China last year. While cyber attacks have happened in the past (think Google very recently), these cases cause concerns as they seem to target trade secrets.
The Four Corners’ Chinese Whispers report can be watched here.
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Categories : BHP Billiton, China, Fortescue, iron ore, Rio Tinto
Should you care to know, I was thrilled upon hearing that Vale wants to start iron ore contracts (2010/2011) negotiations this month. Thrilled because the last negotiations ended up being a succession of drama and political games. Who needs tv series when iron ore contract negotiations can do just as well?
There are a number of developments that have persisted or unfolded since the previous round of negotiations. Mr. Hu is still detained. Rio Tinto and BHP Billiton are struggling to make their Pilbara iron ore tie up bearable to regulatory authorities in Europe and elsewhere. In a bid to calm authorities on their monopolistic tendencies, they have decide not to market jointly 15 per cent of their Pilbara production. On its side of the Pilbara, Fortescue, which has started Q4 negotiations with China roughly a month ago (and with Japan and Korea this week), has unveiled the Solomon project which plans on for a new mine, new rail and new port to produce roughly 60 mtpa to 100 mtpa of iron ore. Western Australia ventures are also at risk of facing higher royalties.
At present time, I guess it makes sense for iron ore producers to secure prices at a time where recovery is gathering speed amid the persistent risks of a double-dip recession materializing. The tone of the negotiations may be different this time around. BHP Billiton highlighted this autumn that China realised that it had to play with the big boys. Whether this means that China will stop pleading in favour of a Chinese mechanism in iron ore contracts is unclear. The recent rise in spot prices is also a contributing factor to weakening the Chinese position in negotiations, it has been reported.
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Tags: China, Fortescue, iron ore
Categories : China, Fortescue, iron ore
You know sometimes governments are so keen on pursuing a specific agenda that no matter how much opposition and obstacles they may face they will push their policies through eventually calling the outcomes a victory, a win-win solution even though they lead to little or no benefits besides face-saving. China’s iron ore quest fits that pattern quite well.
Here’s the grand debacle in a nutshell. Earlier this year China started to negotiate contracts for iron ore seeking to achieve a 40-45% reduction from the previous year’s contracts. As the price of iron ore picked up, the top iron ore suppliers were reluctant to agree to such a cut considering that Japanese mills had set up contracts reducing benchmark prices by 33% from the previous year. As contracts expired, Chinese steel mills had to purchase iron ore at spot prices for more than they would have paid had they settled for a 33% reduction. Some mills even defected the national contract negotiation scheme to secure their own individual contracts. One would think the four Rio Tinto officials jailed on accusations of bribery related to the iron ore negotiations would crown the whole Chinese endeavour as a fiasco. It truly did but I suggest that it is the deal reached this week with Australian miner Fortescue Metal that allows the scenario explained in the first paragraph to materialize.
Fortescue Metal is an up and comer in the field of iron ore. It started mining at its Pilbara project in 2008 and is contemplating expansion activities to compete with bigger Pilbara neighbours Rio Tinto and BHP Billiton. As such, the deal reached between Baosteel and China Iron and Steel Association (CISA) and Fortescue, involves a 35% price cut from the previous year contract prices in exchange of US $6 billion in funding whose terms have yet to be detailed. This deal applies to about 20 million tonnes of iron ore and will allow China to save $35 million according to a Reuters’ calculation which makes it an expensive deal but allows for CISA to save face with a deal that is slightly better than what is offered to mills in South Korea and Japan. MasterCard’s slogan :”There are some things money can’t buy ..” seems to have lost its meaning all of a sudden. Of course China could be attempting to breed a rival to the top iron ore suppliers but the extent to which those may be influenced by this deal is still unclear. According to Macquarie this deal will prevent Fortescue from taking advantage of higher spot prices. Also as a result of this deal, Fortescue will be loaded with debt issued by its only trading partner may become problematic in the longer term.
In sum, this deal is far from being as rosy as China and Fortescue would like to hail it. The deal also comes across as second best to the failed Rio Tinto- Chinalco deal in which Chinalco would have secured stakes in Rio Tinto iron ore assets.