According to BC Iron’s managing director, iron ore prices will remain above $US100 a tonne for the next two years, with the expected cash cow to come off the back of stabilised prices labelled as “money for jam”.
Morgan Ball spoke to a group of shareholders in Perth yesterday, outlining that with cash costs for the company’s Nullagine mine expected to stay below $50 a tonne, margins will remain resilient, The Australian reported.
"Our cost base is very well understood," Ball said.
"If we're moving the dirt, we know what it's going to cost us. As soon as you get a $US5 move in the iron ore price, or a 5c reduction in the exchange rate, it's money for jam."
BC Iron posted a 41 per cent increase in its annual profit to $71.4 million last month, while also reporting a record production of six million tonnes a year.
As Australian Mining reported last week, the continuing strength of the steelmaking ingredient comes as the slowing demand from China usually seen at this time of the year has failed to come into play.
The demand revival follows a report by the World Steel Association which showed global steel production rose to 133 million tonnes in September, a 6.1 per cent jump on last year’s numbers.
"China has been restocking after record levels of iron ore imports over the past few months," Deutsche Bank strategist Xiao Fu said.
"We expect the pace of restocking could slow. However, we are still below the 2011-12 (inventory) peaks, which suggests that the restocking cycle could last for another two or three months."
Ball said with stabilising prices comes growth opportunities, but was vague on what these may entail.
"I would like to grow the company. I expect you will see a growth opportunity come through for BC Iron, but I can't tell you when that will be."
Last year the miner paid Fortescue Metals Group $190m to increase its stake in the joint venture Nullagine mine from 50 per cent to 72 per cent.
"We've done one material deal in the last 12 months — let's swallow that and enjoy it," Ball said.
Ball took over as managing director of the company in May after former Mike Young stepped down from the post.
Ball was previously the BC Iron’s finance and executive director.