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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (44725)	10/8/2009 6:09:00 PM
From: LoneClone	Read Replies (1) \| Respond to of 197074

Benchmark system for iron ore pricing may not survive - RCR The iron ore-steel sector may start contract pricing talks for iron ore this month but research by a Sydney group casts doubt on whether a benchmark will be set and whether it will survive in its historic form. Author: Ross Louthean Posted: Thursday , 08 Oct 2009 PERTH - mineweb.co.za The iron ore-steel sector may start contract pricing talks for iron ore this month but research by a Sydney group casts doubt on whether a benchmark will be set and whether it will survive in its historic form. Resource Capital Research (RCR) has released its first study on the state of the iron ore market, to complement the quarterly studies it has been producing on uranium and gold. Iron ore supply and prices increased in the second and third quarters of this year, tracking stimulus-driven demand for steel, especially in China. Spot prices for iron ore rose in the September Quarter, reaching a 2009 high of $US105.90 per tonne but RCR said Chinese imports and stockpiling of ore were now decreasing. No China benchmark contract price was set for 2009. Iron ore share prices in the last three months continued to outperform overall equity markets and many iron ore projects commissioned by Australian companies in the pre-2009 boom have reached advanced stages of development but require transport infrastructure to reach production. "The iron ore and steel markets continued to improve through the September Quarter, if erratically," says RCR's iron ore analyst, Trent Allen. "Iron ore spot prices tracked up, in line with increasing demand for steel, though this trend has levelled off in recent weeks. A pullback was not unexpected, given the strong run through 3Q09, when the spot price gained 16% and reached US$105.9/t (62% Fe), which was 76% above the non-China benchmark price of (US$62/t at 64% Fe). Allen said the spot market was open to speculation and, in the absence of a China benchmark, was having an "unusually strong influence on the iron ore space." This has helped dampen China's hopes for a 40% cut in the 2008 benchmark and was a major reason why no contact price was set. BHP Billiton, in particular, has been pushing for a move to an index-based pricing system and shorter contracts. Allen said iron ore equities performed strongly over the period. The iron ore juniors viewed by RCR, on average outperformed the market in 3Q09, lifting 34% as compared to 19.9% for the ASX200. "This was influenced by some strong performers, notably Iron Road, which gained 270%," he said. A vital issue for these companies was transport infrastructure. Alliances set up in the mid west and Pilbara in Western Australia may play an increasing role in pushing for shared port and rail facilities at Port Hedland and the planned Oakajee port. "A similar alliance could form in South Australia, where the lack of a deep water port has been a problem for the industry, though Centrex was making good progress with Port Lincoln.'' The ongoing hearing of the Australian Competition Tribunal, over third-party access to BHP and Rio's Pilbara rail network, was important -- the outcome could influence development of the WA iron ore sector and set a national precedent for infrastructure access rights. RCR's long-term forecast was for $US40/t at 62% Fe for fines and US$48/t for lump. Some of the companies studied by RCR were: Apollo Minerals Ltd (ASX: AON): It is drilling at the Mt Oscar project in the Pilbara, with early results possible this month. Mt Oscar has an exploration target of 800 Mt iron ore; a resource was expected in 2010, with production possible in 2013. Atlas Iron Ltd (ASX: AGO): A new producer with an eye to the future, and is planning to merge with Warwick Resources (ASX: WRK) to acquire SE Pilbara tenements with ~100mt plus exploration potential. This means longer term production could accelerate well beyond the 12 Mtpa planned for 2012. BC Iron Ltd (ASX: BCI): The company was into a definitive feasibility study and has a landmark joint venture with miner Fortescue Metals (ASX: FMG) to look at a 1.5 Mpta start-up on its Nullagine iron ore project and could begin producing direct shipping ore in mid-2010. A 120,000t trial mining test pit has commissioned and Chinese mills were showing interest in premium product. Brockman Resources Ltd (ASX: BRM): An advanced explorer which released a prefeasibility study for its 1.4 Bt Marillana iron ore deposit in the Pilbara and envisages production of 17 Mtpa from 4Q12. Negotiations on crucial rail access agreements were underway. Centaurus Resources Ltd (ASX: CUR): It has moved closer to production, with the release of two initial resource statements for its itabirite projects in Brazil's Iron Quadrangle (Itambe and Passabem). Trial mining at 300,000 tpa was planned for 4Q10, ahead of 1 Mtpa in 2H11. Emergent Resources Ltd (ASX: EMG): Since mid 2008, EMG has fast-tracked an exploration target at Beyondie in Western Australia's hinterland into a 127 Mt magnetite resource with upside to 1 Bt. A resource expansion and confirmation of a $A200m JV with CMIC of China was expected in the December quarter. Fortescue Metals Group Ltd (ASX: FMG): The upstart that tweaked the noses of both BHP Billiton and Rio Tinto on their dominance in the Pilbara, was now a well established producer. However FMG's new iron ore price deal with China was in doubt, after the deadline passed for FMG to find and accept between $A5.5-6 B funding to expand. It shipped 27.3 Mt of iron ore in FY09, with a target rate +50 Mtpa by 2H10. IMX Resources Ltd (ASX: IXR): The company was into pre-construction on its Cairn Hill iron-gold-copper project in South Australia and has a DSO offtake agreement with China's Tonghua group for a 1.7 Mtpa operation. Iron Road Ltd (ASX: IRD): an advanced explorer that has seen its market capitalisation increase 270% in 3Q09, after release of a 110 Mt JORC resource and 4 Bt target for the Warramboo magnetite project in SA. Sphere Investments Ltd (ASX: SPH): has a bankable feasibility study for its Guelb el Aouj magnetite project in Mauritania for a 7 Mtpa DR pellets from a 429 Mt mining. Target production is from 2013.