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Bulk Buys: Rinehart’s FY22 mega billions, FMG’s new chief and Australia’s iron ore gamble in Africa
Mining
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- Read it and weep: Gina’s Roy Hill made a $3.2 billion profit in FY22
- Andrew Forrest’s iron ore slash green energy company FMG appoints mining chief … from oil and gas major Woodside
- Genmin’s Joe Ariti on the value in West Africa’s high grade iron ore
Between IR laws and athlete empowerment, Gina Rinehart has spent little time in the news of late for the iron ore mines that rake in her billions.
But amid it all are the billions, and she is still raking them in.
After announcing a $302 million profit and $225 million maiden dividend at Hancock’s 100% owned Atlas Iron business on Monday, Australia’s richest person backed it up with yesterday’s accounts for her flagship Roy Hill mine.
The company, 70% owned by Hancock, pulled in $3.2 billion in after tax profits in FY22, down from $4.4 billion in 2021, paying out $3.3b in dividends to its owners.
The mine paid off the $10 billion debt its owners took on to build it five years after its 2015 opening.
Over the past three years it has now returned $9.375 billion to its shareholders. Hancock is the largest beneficiary at 70%, capturing $2.31b of this year’s payout, with Marubeni (15%), POSCO (12.5%) and China Steel Corporation (2.5%) boasting minority interests.
It sets up Hancock Prospecting for another bumper profit despite lower iron ore prices in FY22. Profits were down 28% on the previous year but up 43% on FY20, with cash flows of $4b alongside $761m in State and native title royalties and $2.1b in income tax payments.
$683m was committed to capex, including the Pilbara’s first battery powered locomotive, due for delivery next year.
CEO Gerhard Veldsman said Roy Hill had produced a record in excess of 60Mt of iron ore shipped.
Lobbying on the Government’s IR changes including multi-employer bargaining, which have been contested and criticised by major business and mining lobby groups, remains front and centre.
“Productivity improvements remain the only sustainable way of being able to improve real wages,” Roy Hill commented in gangly and awkward prose.
“Rather than regressive industrial relations changes impacting the positive relationship between employers and employees in the mining industry which is fundamental to the collaborative and co-operative environment needed to deliver improved productivity.”
Told you it was gangly and awkward.
From one iron ore squillionaire to another
After almost a year of speculation Andrew Forrest has picked his lieutenant to lead what could be the $60 billion capped Pilbara giant’s diversification into critical minerals and rare earths mining, with the appointment of Woodside executive Fiona Hick as Fortescue Metals Group’s (ASX:FMG) new mining CEO.
The move comes almost 12 months after the resignation of former CEO Elizabeth Gaines, who stayed on until August while the vacancy remained unfilled.
Executive departures have been a theme at FMG of late. The most recent was Guy Debelle, former deputy governor of the Reserve Bank, whose tenure as Fortescue Future Industries CFO was cut short ostensibly for health reasons.
Twiggy returned himself as executive chairman in May having presumably found no one who could match his enthusiasm for miner’s new dual mission as iron ore producer and saviour of the known world.
It followed two years of travels from Forrest, setting up Fortescue’s green energy arm FFI and pledging to deliver renewable hydrogen and energy projects across the globe.
There is a hint of irony about FMG announcing Hick’s appointment yesterday. The president of WA’s Chamber of Minerals and Energy, Hick has been the EVP of Australia for Woodside (ASX:WDS) since 2019 and spent almost two decades before that in the energy business, though she has a background in the Pilbara iron ore industry with Rio Tinto (ASX:RIO) back in the late ’90s and early 2000s.
Forrest has become an outspoken critic of oil and gas companies and “greenwashing” in general. But yesterday Woodside was selected ahead of FFI as the preferred bidder to develop a hydrogen hub on New Zealand’s South Island by Meridian Energy.
What a coincidence that is.
Nevertheless, Hick says she is committed to the green energy vision of FMG — which will derive its income from the 187-192Mt of iron ore it plans to ship to primarily Chinese steel mills over the coming financial year but also plans to spend US$6.2 billion decarbonising its Pilbara mines by 2030.
“I have enjoyed and grown immensely during my 20 years in energy. I am as committed to the new future of the world as Andrew is,” she said.
“We must provide the metals and the energy which will help to accelerate the energy transition. I join with, and commit to, Andrew and Fortescue’s vision of becoming the leading green metals and energy company globally.
“This is a once-in-a-lifetime opportunity. I come into this role with an enormous and exciting project pipeline to continue to grow and execute for Fortescue. I am excited to deliver our vision with the entire Fortescue family, working closely with an amazingly supportive chairman and board.”
Fortescue Metals Group (ASX:FMG) share price today:
African iron ore junior confident Aussie miners can succeed
One area where Forrest was especially bullish at this month’s FMG AGM was the Belinga iron ore project, where Fortescue plans to start drilling next year.
Mooted as a high grade iron ore play in the West African country of Gabon, FMG is planning to spend $90 million over three years investigating what could be a significant deposit of high grade iron ore, akin to Rio’s Simandou deposit in Guinea.
But constructing major iron ore projects in Africa has always proven tricky for Australian companies, with some projects in less stable jurisdictions appropriated in an apparent contest with Chinese interests, and the continent’s poor infrastructure and history of corruption and instability boding poorly for projects of the scale and complexity of an iron ore mine.
But the boss of one of a handful of Australian companies at a relatively advanced stage on the African continent shares Forrest’s enthusiasm for Gabon, a major manganese and oil and gas producer, as a future iron ore exporter.
GenMin (ASX:GEN) is planning to export 5Mtpa of high grade iron ore from its Baniaka project in Gabon from 2024, with an FID due next year.
While there are a handful of producers in Africa, including Mauritania, Algeria, Anglo American’s Kumba in South Africa and Arcelor Mittal’s Liberian ops, production growth out of the continent has stagnated in recent years.
MD Joe Ariti said the grade and quality of the undeveloped resources in West Africa meant they would play a key role in the decarbonisation of the iron ore sector, helping steel factories improve the efficiency of their blast furnaces.
“So the demand and the growth of steel, whether it be China or whether it be in the BRIC nations or others will continue, so that demand will need to be met from somewhere,” Ariti told Stockhead.
“The second point is if you look at Belinga, Baniaka, Simandou, they’re all high grade.
“They’re all going to be high value in use. And if you think about green delivery, decarbonisation in China or decarbonisation in Europe in the iron making process, they’re going to be looking for those sorts of products in the market.
“So I think the question is twofold. Will the market continue to grow? Yes, it will. And the second part of the question is, will the market segregate, so that the marginal product for 56-57% drops off because you’d have to process more units to achieve the same sort of output.”
While Simandou has been dubbed the “Pilbara Killer” due to its potential to bring upwards of 100Mt of new supply a year into the seaborne market, Ariti thinks the 2025 deadline the Guinean Government has set for Rio and its Chinese counterparts to bring the four block deposit into production is overambitious.
“We are six weeks away from 2023, there’s 600km of rail to be built, and you can’t deliver any product until you build that rail,” he said.
“So 2023 before we even sort out how the infrastructure’s going to be put together. It’s then got to be funded, it’s then got to be implemented, the project’s got to be built.
“2025 I couldn’t see how that could come to… given where the project is currently at.”
Baniaka, where Genmin has aspirations to scale up to 10Mtpa and then 20Mtpa once it’s generating cash, is expected to be backed by funding and an offtake agreement from Anglo American, which is currently undertaking due diligence following the release this month of a PFS which put a capex of around US$200m on the development.
Genmin (ASX:GEN) share price today:
Iron ore futures hit US$100/t amid China Covid protests
Iron ore prices climbed 2.51% in Singapore to US$100.95/t as of 7.40pm AEDT yesterday, as Chinese authorities scrambled to respond to unusual protests against the Communist Party’s handling of its Covid-19 outbreaks.
As case numbers rise and broad scale lockdowns look to continue into 2023, Xi Jinping may be forced to speed up reopening and elderly vaccination plans to quell a rare show of dissent in the authoritarian nation.
Along with support for the property sector including cuts to reserve ratios and looser lending standards, that has stirred hope from traders of a quicker than expected rebound in commodity demand.
It comes less than a month since iron ore dropped below US$80/t, hitting a two-year low at the end of October.
| CODE | COMPANY | PRICE | 1 WEEK RETURN % | 1 MONTH RETURN % | 6 MONTH RETURN % | 1 YEAR RETURN % | MARKET CAP |
|---|---|---|---|---|---|---|---|
| ACS | Accent Resources NL | 0.025 | 0% | 0% | -58% | -55% | $ 11,650,682.08 |
| ADY | Admiralty Resources. | 0.008 | 0% | 0% | -38% | -47% | $ 10,428,633.22 |
| AKO | Akora Resources | 0.185 | 3% | -3% | -23% | -26% | $ 12,064,419.36 |
| BCK | Brockman Mining Ltd | 0.023 | 0% | 0% | -43% | -44% | $ 213,445,339.01 |
| BHP | BHP Group Limited | 44.82 | 4% | 20% | 3% | 32% | $ 222,338,864,202.84 |
| CIA | Champion Iron Ltd | 6.21 | 3% | 30% | -17% | 38% | $ 3,103,158,756.00 |
| CZRDA | CZR Resources Ltd | 0.24 | -6% | 9% | -4% | 107% | $ 59,105,428.09 |
| DRE | Dreadnought Resources Ltd | 0.1 | 4% | -13% | 127% | 133% | $ 295,076,308.90 |
| EFE | Eastern Resources | 0.036 | -18% | 3% | 3% | -50% | $ 46,630,224.43 |
| CUF | Cufe Ltd | 0.015 | 0% | 0% | -50% | -50% | $ 14,491,685.48 |
| FEX | Fenix Resources Ltd | 0.235 | 2% | 7% | -25% | 4% | $ 137,172,771.20 |
| FMG | Fortescue Metals Grp | 19.46 | 1% | 32% | -1% | 13% | $ 58,623,492,038.72 |
| FMS | Flinders Mines Ltd | 0.51 | 1% | -2% | 21% | -15% | $ 84,424,288.50 |
| GEN | Genmin | 0.205 | -2% | -21% | -2% | 21% | $ 59,490,448.50 |
| GRR | Grange Resources. | 0.77 | 1% | 27% | -50% | 41% | $ 879,577,410.48 |
| GWR | GWR Group Ltd | 0.061 | -5% | -5% | -49% | -43% | $ 19,594,215.96 |
| HAV | Havilah Resources | 0.32 | -2% | 5% | 19% | 68% | $ 102,907,743.25 |
| HAW | Hawthorn Resources | 0.115 | 25% | 37% | -8% | 22% | $ 38,354,295.50 |
| HIO | Hawsons Iron Ltd | 0.097 | -8% | -3% | -83% | 2% | $ 66,694,765.50 |
| IRD | Iron Road Ltd | 0.125 | -7% | -4% | -31% | -39% | $ 99,982,663.00 |
| JNO | Juno | 0.091 | 0% | -9% | -21% | -27% | $ 12,548,365.09 |
| LCY | Legacy Iron Ore | 0.019 | 6% | 6% | -21% | -17% | $ 121,729,697.78 |
| MAG | Magmatic Resrce Ltd | 0.094 | -2% | -6% | 40% | -5% | $ 28,386,508.61 |
| MDX | Mindax Limited | 0.059 | 0% | 0% | 0% | 28% | $ 115,533,663.12 |
| MGT | Magnetite Mines | 0.016 | -11% | -3% | -38% | -31% | $ 60,668,472.99 |
| MGU | Magnum Mining & Exp | 0.022 | -15% | -29% | -58% | -73% | $ 15,695,811.32 |
| MGX | Mount Gibson Iron | 0.435 | 0% | 13% | -36% | 18% | $ 510,056,119.86 |
| MIN | Mineral Resources. | 83.77 | 1% | 17% | 37% | 92% | $ 15,531,619,752.00 |
| MIO | Macarthur Minerals | 0.125 | -4% | -22% | -63% | -67% | $ 22,363,220.88 |
| PFE | Panteraminerals | 0.12 | -4% | 25% | -4% | -44% | $ 6,180,134.40 |
| PLG | Pearlgullironlimited | 0.02 | 0% | -13% | -43% | -78% | $ 1,098,046.16 |
| RHI | Red Hill Iron | 4.15 | -1% | 18% | 18% | 46% | $ 273,184,477.72 |
| RIO | Rio Tinto Limited | 107.83 | 4% | 22% | -5% | 14% | $ 38,662,168,688.10 |
| RLC | Reedy Lagoon Corp. | 0.011 | -15% | -15% | -58% | -73% | $ 6,689,122.94 |
| SHH | Shree Minerals Ltd | 0.009 | 0% | 29% | 0% | 0% | $ 11,765,625.47 |
| SRK | Strike Resources | 0.091 | -4% | -13% | -48% | -9% | $ 25,920,000.00 |
| SRN | Surefire Rescs NL | 0.011 | -8% | -8% | -72% | -8% | $ 20,557,725.20 |
| TI1 | Tombador Iron | 0.023 | 5% | 0% | -32% | -26% | $ 49,150,594.58 |
| TLM | Talisman Mining | 0.13 | -4% | -7% | -32% | -26% | $ 25,344,832.10 |
| VMS | Venture Minerals | 0.023 | -8% | 10% | -47% | -52% | $ 45,823,897.39 |
| EQN | Equinoxresources | 0.13 | -10% | 8% | -26% | -40% | $ 5,850,000.13 |
| AMD | Arrow Minerals | 0.004 | -11% | -20% | 33% | -38% | $ 8,135,060.38 |
It’s been an iron ore sort of week, but coal is moving too
Quietly in the background coal has resumed its upwards surge, with Newcastle grade thermal heading back to US$380/t according to Trading Economics.
The trigger for the climb this week is an expected cold snap in the so far mild European winter, which should see energy consumption rise.
Supplies of coal and gas are extremely tight due to Russia’s ban from European coal markets along with general supply side issues.
Trading Economics suggest the La Nina phenomenon in Australia could see thermal coal output fall 13Mt this year to 183Mt. Australia is the world’s largest exporter of metallurgical coal for steelmaking and second biggest seaborne supplier of energy coal after Indonesia.
| CODE | COMPANY | PRICE | 1 WEEK RETURN % | 1 MONTH RETURN % | 6 MONTH RETURN % | 1 YEAR RETURN % | MARKET CAP |
|---|---|---|---|---|---|---|---|
| NAE | New Age Exploration | 0.008 | 14% | 14% | -20% | -27% | $ 11,487,191.28 |
| CKA | Cokal Ltd | 0.165 | -13% | -18% | 22% | 6% | $ 155,339,081.70 |
| NCZ | New Century Resource | 1.01 | -15% | -8% | -54% | -54% | $ 144,658,494.20 |
| BCB | Bowen Coal Limited | 0.27 | 4% | -5% | -23% | 80% | $ 477,283,829.84 |
| SVG | Savannah Goldfields | 0.17 | -13% | -23% | 6% | -26% | $ 29,341,734.46 |
| GRX | Greenx Metals Ltd | 0.37 | -1% | 37% | 95% | 72% | $ 91,303,367.04 |
| AKM | Aspire Mining Ltd | 0.078 | 0% | -6% | -10% | 5% | $ 40,103,321.82 |
| AVM | Advance Metals Ltd | 0.013 | 8% | 8% | 0% | -24% | $ 6,266,572.90 |
| AHQ | Allegiance Coal Ltd | 0.049 | -8% | -14% | -88% | -88% | $ 49,644,796.45 |
| YAL | Yancoal Aust Ltd | 5.5 | 13% | 3% | -10% | 112% | $ 7,236,008,114.76 |
| NHC | New Hope Corporation | 5.57 | 4% | -2% | 47% | 179% | $ 5,009,969,932.80 |
| TIG | Tigers Realm Coal | 0.012 | -8% | -14% | -33% | -45% | $ 156,800,428.42 |
| SMR | Stanmore Resources | 2.56 | 5% | -9% | -2% | 174% | $ 2,298,523,329.90 |
| WHC | Whitehaven Coal | 9.26 | 10% | -2% | 80% | 280% | $ 8,764,051,598.87 |
| BRL | Bathurst Res Ltd. | 0.71 | -11% | -21% | -50% | 7% | $ 146,390,231.70 |
| CRN | Coronado Global Res | 2.02 | 5% | 21% | 10% | 119% | $ 3,327,760,654.05 |
| JAL | Jameson Resources | 0.115 | 10% | 77% | 53% | 28% | $ 46,981,332.00 |
| TER | Terracom Ltd | 0.78 | -13% | -19% | 3% | 322% | $ 623,624,249.04 |
| ATU | Atrum Coal Ltd | 0.007 | 0% | 0% | -24% | -75% | $ 8,987,788.37 |
| MCM | Mc Mining Ltd | 0.215 | 10% | 8% | 102% | 210% | $ 89,478,357.53 |
| DBI | Dalrymple Bay | 2.43 | -3% | 0% | 16% | 18% | $ 1,234,446,550.83 |
