Resilient BC Iron chief bullish on demand for ore from Fortescue venture
The Age
Wednesday August 5, 2009
THE sterling-effort-of-the-day award at the Diggers & Dealers bash in Kalgoorlie yesterday went to BC Iron chief executive Mike Young. He was first to present at 8.30am and looked pretty sharp €” a fine effort given Garimpeiro and other lost souls were sharing a drink with him barely five hours earlier.Young is bullish on the outlook for iron ore, having recently returned from a marketing tour of Chinese steel mills. He reported continuing strong interest in the iron ore that BC is to produce in its ground-breaking joint venture with Andrew "Twiggy" Forrest's Fortescue. Under the joint venture, Fortescue gets 50 per cent of BC's Nullagine project in return for allowing the iron ore to travel on Fortescue's rail and port network in the Pilbara.When Twiggy said way back that, unlike BHP and Rio Tinto, he would welcome junior producers using Fortescue's infrastructure, no one thought that taking 50 per cent of the junior's project would be part of the deal. Still, as Young noted, it is better to be left with 50 per cent of a producing mine (early next year) than 100 per cent of a project that can't get into production because it doesn't have access to rail and ports.There has been plenty of talk at the conference that Twiggy is intent on applying the 50:50 model with juniors elsewhere in the Pilbara.GRANGE Grange Resources boss Russell Clark provided further proof on day two of the Diggers & Dealers bash in Kalgoorlie that China's attempts to jawbone iron ore prices lower has flopped. The rebound in global economic growth following unprecedented stimulus packages has made sure of that.Grange is Australia's only producer of iron ore pellets from its Savage River mine in Tasmania. This year it will produce just under 2.2 million tonnes of pellets, down from 2.5 million tonnes last year. The fall is due to some since-resolved mechanical issues in the pellet plant, not demand for pellets.Clark told the conference that while benchmark prices were set lower two months ago, the $US70 ($A83.45) a tonne it is now receiving from its Chinese customer base and BlueScope in NSW is "still the second highest price ever in what can be described as the worst economic conditions ever"."We are very bullish about what the price is going to do. We are seeing customers coming to us requesting spot loads which we can't fill for them," Clark said, before revealing that steel mills looking for spot loads had been offering a 20 per cent premium to the benchmark price.Clark tipped that iron ore prices would move higher next year. His intelligence on these things is pretty good given Grange is 48 per cent owned by Shagang, China's biggest privately owned steel group and the fourth biggest overall.Clark dealt with the perception that Grange is under pressure to flog its pellets to Shagang on the cheap. Last year Shagang continued to pay the benchmark price of $US140 a tonne when the spot-market price collapsed in the wake of the global financial crisis. It was BlueScope that cancelled some shipments.ASX The Australian Securities Exchange is exploring ways of improving the fund-raising capacity of junior mining and exploration companies.One of the options is to increase their exposure to overseas capital markets by dual-listing them through the London Stock Exchange's Alternative Investment Market. It's early days but there has got to be some merit in being able to tap London's appetite for funding the hunt for the next big mine. Having said that, AIM has been doing it very tough in the global financial crisis.
© 2009 The Age