Australian iron ore producer Mineral Resources (MinRes) remains focused on growth, despite an operating loss across its iron ore business in July-December over lower iron ore prices, stronger discounts for low-grade ores, and higher shipping and haulage costs.
MinRes, which produces ore with 58-60pc Fe, reported an operating margin of minus 12pc for its iron ore operations in July-December compared with a positive margin of 48pc for the same period in 2020. The fall in profitability is likely to be reflected in the results of other Australian iron ore mining firms, particularly those producing lower grade ores, and has already prompted MinRes to cut production at its high-cost Yilgarn operations in Western Australia.
The firm expects stronger profitability in this half-year, as freight and haulage rates are falling and iron ore prices have recovered from the recent lows in the middle of November.
MinRes remains committed to its ambitious iron ore growth plans, arguing that the lower cost and higher volume projects will be profitable through the pricing cycle unlike its existing smaller scale, higher cost mines.
MinRes has a concrete funding plan for its new 30mn t/yr mining hub at Ashburton in the western Pilbara and its 20mn t/yr Pilbara hub further east, the firm's chief executive, Chris Ellison said. These projects are robust through the pricing cycle, even down to $40/t, because they are extremely low cost, he added.
Ashburton will produce ore with around 57.5pc Fe and the Pilbara hub around 60.5pc Fe. These compare with the traditional 60-62pc Fe sold by major rivals BHP and Rio Tinto from the Pilbara. MinRes plans to make a final investment decision on Ashburton in June, with first ore on ship in late 2023 or January-March 2024 depending on Covid-19. Ellison is so confident of the project moving to production that he has already ordered trans-shippers to load bulk carriers at the port of Onslow. The project is expected to cost A$2.4bn-2.55bn ($1.72bn-1.83bn), with an operating cost of A$30-40/wet metric tonne.
The Pilbara hub will take two years for approvals and another two for development, as it includes working with Pilbara iron ore mining firms Hancock Prospecting and Roy Hill to access rail and port infrastructure.
Argus assessed 58pc Fe iron at $124.85/dry metric tonne (dmt) cfr Qingdao on 8 February, up from $61.30/dmt on 18 November but down from a high of $207.10/dmt on 12 May. The Argus ICX iron ore was last assessed at $149.40/dmt cfr Qingdao on a 62pc Fe basis on 7 February, up from $87/dmt on 18 November but down from a high of $235.55/dmt on 12 May.
MinRes has the financial backing to push forward with projects and maintain operations, despite weaker iron ore prices and wider discounts for low-grade products, unlike other low-grade iron ore mining firms that have already closed operations and shelved growth projects.
By Jo Clarke
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Argus Media Limited published this content on 09 February 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 09 February 2022 05:37:04 UTC.
