The boss of Gina Rinehart’s $10 billion Roy Hill mine says Australian miners will have to fight to stay competitive in the iron ore market.
Speaking at a breakfast in Perth, Barry Fitzgerald used the deal Brazilian miner Vale inked with China last week as a warning to domestic producers.
"What it does remind me, and it should remind all of us, that we in the mining industry are in a competitive, international business," Fitzgerald told a Morgans Financial breakfast in Perth on Friday.
"What we do needs to reflect the pressures and the actions of our competitors."
Last week Vale announced China would fund the miner’s massive S11D project which is set to add a further 90 million tonnes a year to the seaborne iron ore market.
Vale also revealed that it would start shipping a blended product with an iron ore content on 63 per cent.
"That particular product is direct competition for both us and the two major producers in the Pilbara and that again reminds us that we are in a competitive environment and that our market share and our position in the world will be coveted by other companies, so we need to make sure we are productive and efficient," Fitzgerald said.
The Roy Hill project is more than 81 per cent complete, and is on schedule to ship first ore in September.
The mine will produce 55 million tonnes of iron a year, and some analysts say the operation will have a negative impact on the already depressed price of the commodity.
Roy Hill has always stayed tight-lipped about its break-even costs , but Fitzgerald said the mine was on the “lower quartile of the cost curve".
"The reality is that we have always been margin focused," he said.
"Because we started off with the constraint of our capacity we were not chasing and have not chased incremental tonnes for additional profitability."