Iron ore miners still smiling

Benchmark iron ore prices drop 37% but still represent second highest price on record.

“Benchmark iron ore prices may have dropped an average of 37% recently; however, they are still at a level that represents the second highest price on record,” Western Plains Resources executive chairman Bob Duffin told MINING DAILY.

Last week Hamersley Iron agreed on a benchmark iron ore price with a key Japanese steel mine for the year commencing 1 April 2009 for US112c/mtu for lump and US97c/mtu for fines.

The benchmark price represented a reduction of 44.5% for lumps and 32.9% for fines from last year’s prices.

Duffin said that while the reductions seemed large, prices were still 10% higher than spot prices.

“In the last quarter of last year China closed 250 million tonnes of annual production; however, since that time they have managed to re-open some 120 million tonnes,” he said.

“Iron imports to China are near record prices and ship charter rates are sky-rocketing which tells me that reports of the difficulties currently facing the iron ore sector are greatly exaggerated.”

Western Plains Resources is a relatively small iron ore pre-producer with a market capitalisation of $40 million.

The company has two principle projects, one of which is fully permitted and shovel ready.

“Our Peculiar Knob project will be ready for shipment within the next few months. All permits are in place, our only missing link is a suitable port,” Duffin said.

Duffin said the higher than expected benchmark prices should send a positive signal to the South Australian Government, owner of the relevant land at Port Bonython, and to the Spencer Gulf PortLink consortium, the Government’s preferred tenderer for the development of the proposed bulk commodities export facility.

“The Government’s preferred tenderer submitted their feasibility study for Port Bonython in the first week of March. Here we are, nearly three months on, and the industry still doesn’t know what timetable the consortium is working towards in term of its commitment to the process development.

“I believe the Government is wary of progressing with the Port while ever iron prices are falling. But, while the prices have certainly fallen, there are many projects that remain financially robust and the need for the Port hasn’t gone away,” Duffin said.

“Apparently the Port is on Infrastructure Australia’s priority list; however, there was no funding made available for it in the Federal Budget this year and I don’t believe the South Australia Government will allocate funds to the project when it announces its budget early next week.”

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