Is Rio Tinto (ASX:RIO) going to disappoint on shipments yet again?

The gaffe-prone Pilbara miner, which was carried by stratospheric iron ore prices to a US$9.1 billion dividend at the half year, appears likely to miss its ambitious guidance again if figures tabled by UBS yesterday are anything to go by.

Rio has for years struggled to work its way up to the targeted 360Mtpa run rate it once believed it would hit when the new Gudai-Darri mine comes online, slashing guidance on multiple occasions in recent years.

Rio really undershot in the first half of the year, with fires and logistical issues at its East Intercourse Island berth seeing the company put the handbrake on exports in the June Quarter.

According to UBS, Rio would need to ship an average of 85Mt per quarter over the second half of the year to hit the lowest end of its 325-340Mt guidance range.

It is currently on track to produce just 81Mt in the September term.

“Based on UBS Evidence Lab shipping data, RIO is currently on track to ship ~81Mt in 3Q and as a result we see 5-10Mt downside risk to 2021 guidance,” analysts from the investment bank wrote.

 

What about the rest?

Brazil’s Vale, which is still in recovery mode from the mass mine shutdowns following the Brumadinho dam wall collapse in 2019, may be the biggest contributor to growth in seaborne supply this year, with its 7% rise in output (10% for all Brazilian miners) balancing out 4% declines from each of BHP (ASX:BHP) and Rio.

But as it aims to ramp up to heady goals of 400Mtpa during 2022, Vale is still struggling to meet its own targets.

“Vale has guided 2021 production at 315-335Mt; to achieve this, Vale needs to produce ~91Mt/q in 2H21 or ship ~83Mt/q (adjusted for domestic sales),” the analysts noted. “Based on UBS Evidence Lab data, Vale is on track to ship ~77Mt in 3Q and as a result we also see 5-10Mt downside risk to Vale’s guidance.

“Vale will update investors on 9-Dec.”

BHP meanwhile is tracking about 3Mt lower year on year in the September Quarter.

Brazilian and Australian exports did hit seven-month highs in August, up 4% year on year. UBS says demand is the biggest issue for miners wondering where iron ore prices are going, not supply.

A weakening property market in particular may serve to dull end user demand for the steel produced from Aussie iron ore.

“We believe Covid restrictions are impacting production…but demand is the key concern with China property falling sharply,” UBS said.

“However, in our opinion, the key concern at the moment is China pig iron production (i.e. iron ore demand) which remains weak in Aug based on the CISA 10-day data.

“Our China property team last week cut their forecast for new starts in 2021 to -9% (2H21 -20%) and expect -7% in 2022; they do however expect deteriorating property data to result in less policy tightening in 2021-23E.”

Prices paid for benchmark 62% iron ore fines fell by 8.5% to US$132.38 on Monday, but derivatives were up on the Dalian and Singapore futures markets yesterday, suggesting a likely bounce Tuesday for Wednesday.

At current prices, UBS said, the Australian majors are still making handy free cash flow margins of around 15%. These would drop to about 5% if the price fell to US$75/t.

 

Much ado about Guinea

Guinea has emerged as the bogey country of Australia’s bulk miners. Firstly, China successfully backed it in from the middle of the last decade to rapidly grab a major share of the world’s bauxite market.

It now produces 82Mtpa, or 22% of global bauxite output, enough to be refined into about a quarter of the world’s supply of aluminium and boasts 7.4Bt of reserves, the world’s largest reserve of the material.

Secondly, Guinea is the home of Simandou, the great high grade iron ore operation in two Acts (one owned by Chinese, French and Singaporean interests and the state bauxite company, the other by Rio Tinto and Chinalco) which threatens to ‘flood the market’ for iron ore when it begins production in the latter part of this decade.

That was before a Coup D’Etat this week, the third in under 40 years, which saw long-standing President Alpha Conde detained by a military junta led by army colonel Mamady Doumbouya.

That sent aluminium prices soaring on Sunday night and Monday morning, great news for a number of small caps toasting decade long highs for the metal like Metro Mining (ASX:MMI) and Canyon Resources (ASX:CAY).

It also underlined the murky diplomatic waters the owners of the two Simandou iron ore projects will face to get their US$14+ operations into production.

Doumbouya and his crew tried to restrain fears foreign mining investments would be compromised by the political situation, saying the transitional authority would honour mining agreements in place.

About 35% of Guinea’s GDP comes from mining, and alongside bauxite and iron ore, the country is also home to AngloGold Ashanti’s (ASX:AGG) 215,000ozpa Siguiri gold mine.

“Société AngloGold Ashanti de Guinée S.A., a subsidiary of AngloGold Ashanti, advises that the Siguiri Gold Mine in Guinea is currently operating normally,” the company said in a statement yesterday.

“AGA continues to monitor the situation in Guinea and remains in close contact with the leadership of the mine, which lies around 850km northeast of the country’s capital, Conakry. The safety of employees remains a priority.”

When Rio suspended work on Simandou close to a decade ago, its rumoured US$22 billion price tag was too hot for the world’s biggest iron ore producer to handle, and just two years ago Rio failed to work out a deal to sell its stake to partner Chinalco.

While work began again at the operation last year, it remains unclear what appetite Rio’s board and shareholders will have to manage a mine in such tough political conditions.

 

Mineral Resources banks cash for Pilbara expansion and Brockman benefits

CODE COMPANY PRICE 1 WEEK RETURN % 1 MONTH RETURN % 6 MONTH RETURN % 1 YEAR RETURN % MARKET CAP
EFE Eastern Iron 0.0355 184 122 280 443 $ 21,620,783.66
RLC Reedy Lagoon Corp. 0.035 94 94 67 218 55
BCK Brockman Mining Ltd 0.054 42 42 69 145 $ 473,240,838.68
HAW Hawthorn Resources 0.062 24 35 -9 -41 $ 20,677,968.01
SHH Shree Minerals Ltd 0.012 20 -8 -8 0 $ 12,758,842.70
ADY Admiralty Resources. 0.016 14 -11 -11 129 $ 19,553,687.30
MGU Magnum Mining & Exp 0.088 13 -30 -12 110 $ 45,240,187.17
PFE Panteraminerals 0.375 12 3 $ 14,437,500.00
LCY Legacy Iron Ore 0.016 7 0 7 220 $ 96,071,077.76
HAV Havilah Resources 0.2 5 -2 -5 25 $ 61,255,445.60
AKO Akora Resources 0.21 5 -13 -42 $ 9,945,256.64
MIO Macarthur Minerals 0.5075 5 -15 -1 -14 $ 71,960,762.85
JNO Juno 0.18 3 -8 $ 25,096,730.19
GEN Genmin 0.2 3 5 $ 56,457,570.00
IRD Iron Road Ltd 0.205 3 -15 -27 80 $ 158,918,058.80
VMS Venture Minerals 0.083 2 -21 54 168 $ 110,741,565.92
ACS Accent Resources NL 0.053 2 2 -44 342 $ 24,699,446.00
SRN Surefire Rescs NL 0.016 0 7 -33 45 $ 18,773,276.95
MDX Mindax Limited 0.042 0 -9 1300 1300 $ 78,663,260.55
MGT Magnetite Mines 0.032 0 -16 10 132 $ 106,925,442.03
RHI Red Hill Iron 3.9 -2 -9 875 1673 $ 230,915,873.65
TLM Talisman Mining 0.165 -3 -21 77 43 $ 31,726,825.45
FMS Flinders Mines Ltd 0.82 -4 -10 -48 -50 $ 148,586,747.76
RIO Rio Tinto Limited 108.52 -4 -17 -8 14 $ 41,089,922,727.66
MIN Mineral Resources. 51.19 -4 -13 33 81 $ 10,140,784,312.86
CIA Champion Iron Ltd 5.5 -6 -18 -2 83 $ 2,815,673,871.84
GRR Grange Resources. 0.56 -6 -24 2 107 $ 659,683,057.86
FEL Fe Limited 0.073 -6 -6 74 248 $ 56,026,315.01
SRK Strike Resources 0.16 -9 -36 -9 7 $ 45,900,000.00
BHP BHP Group Limited 41.86 -9 -20 -13 16 $ 124,471,106,312.86
DRE Drednought Resources 0.039 -11 -5 144 200 $ 101,297,924.13
FEX Fenix Resources Ltd 0.27 -11 -21 8 80 $ 132,219,897.60
MAG Magmatic Resrce Ltd 0.12 -14 -8 -14 -44 $ 28,887,669.25
TI1 Tombador Iron 0.05 -15 -26 -28 138 $ 52,333,583.38
MGX Mount Gibson Iron 0.53 -16 -32 -39 -29 $ 653,389,152.90
GWR GWR Group Ltd 0.185 -16 -36 -30 -4 $ 59,043,356.39
HIO Hawsons Iron Ltd 0.079 -16 -51 144 79 $ 57,757,288.95
FMG Fortescue Metals Grp 17.82 -16 -23 -19 2 $ 57,176,378,527.26
CZR CZR Resources Ltd 0.008 -20 -24 -33 -60 $ 31,376,909.49

Chris Ellison and Mineral Resources (ASX:MIN) have their sights set on becoming a fifth force, if you will, in the Pilbara iron ore industry.

The rich lister wants to turn from a 20Mtpa miner now to a 90Mtpa major in 3-5 years through a series of mine developments and acquisitions.

They have been feverishly banking up deals to tie up tonnes around the Ashburton and Southwest Creek hubs in the Pilbara, to add to the existing Utah Point and Yilgarn operations, buying a stake in the APIJV and paying up to $400 million cash for tiddler Red Hill Iron’s (ASX:RHI) 40% share of the Red Hill Iron Ore JV.

MinRes’ iron ore development plans got all the more real after it sold a 5.4% stake in lithium miner Pilbara Minerals for a tidy profit, banking $328 million to spend on the iron ore business.

That’s not just good news for MinRes, but also its partners both big and small. One of those is small Chinese-backed iron ore explorer Brockman Mining (ASX:BCK), which was up around 42% on no news.

Of course, it is a 50-50 partner with MinRes in the Marillana and Opthalmia mines, which MinRes is developing into a combined 25Mtpa project at a capital cost of around $105 million.

 

Tigers Realm enjoys Russian coal premium

CODE COMPANY PRICE 1 WEEK RETURN % 1 MONTH RETURN % 6 MONTH RETURN % 1 YEAR RETURN % MARKET CAP
TIG Tigers Realm Coal 0.017 42 113 183 147 $ 235,200,642.62
BCB Bowen Coal Limited 0.1725 28 78 240 246 $ 200,009,693.73
MR1 Montem Resources 0.046 21 12 -70 $ 8,311,855.61
WHC Whitehaven Coal 2.98 20 37 80 251 $ 2,984,341,830.48
CKA Cokal Ltd 0.18 20 50 157 267 $ 163,989,404.78
PAK Pacific American Hld 0.021 17 24 5 24 $ 6,690,282.90
CRN Coronado Global Res 1.275 13 35 33 111 $ 2,129,096,237.10
AKM Aspire Mining Ltd 0.089 11 25 -8 11 $ 43,149,143.73
YAL Yancoal Aust Ltd 2.38 11 14 0 19 $ 3,208,667,831.91
SMR Stanmore Resources 0.84 11 8 38 16 $ 216,325,072.80
NHC New Hope Corporation 2.31 9 17 81 106 $ 1,881,127,005.32
BRL Bathurst Res Ltd. 0.7 8 11 71 56 $ 117,956,619.87
PDZ Prairie Mining Ltd 0.3 2 22 36 0 $ 68,506,526.70
LNY Laneway Res Ltd 0.0045 0 -10 -10 -44 $ 17,568,296.70
AHQ Allegiance Coal Ltd 0.63 -1 -6 62 58 $ 210,429,468.16
ATU Atrum Coal Ltd 0.042 -7 -5 -82 -81 $ 29,621,324.13
NCZ New Century Resource 0.1675 -9 -9 2 12 $ 205,687,767.82
JAL Jameson Resources 0.08 -11 -20 -20 -33 $ 24,266,551.20
NAE New Age Exploration 0.0105 -13 -13 -5 31 $ 14,358,989.10
MCM Mc Mining Ltd 0.105 -16 -13 -19 5 $ 16,214,053.28
TER Terracom Ltd 0.155 -18 15 85 24 $ 116,809,182.65

Owen Hegarty’s Tigers Realm Coal (ASX:TIG) may be even more exposed to the booming Chinese coal import market than any other company on the ASX, given it sells its product out of the Bering basin in far east Russia.

Remember, Australian coal, no good in China. Putin’s coal, A-OK.

Tigers Realm enjoyed the benefits of seeing prices for non-Australian hard coking coal soar in the back end of the 2021 financial year, doubling revenue to $14.765 million and reducing its losses by 98% from $17 million in 2020 to just $292,000 in 2021.

This quarter is looking even better. Prices for premium hard coking coal out of jurisdictions like Russia hit new historical highs of US$450.61/t and US$425.11/t for hard coking coal in China on Monday. Just crazy stuff.

It means Tigers Realm, despite being a relatively modest producer with 2021 coal sales guidance of 750,000-800,000t, is beginning to capture the attention of investors.

Tigers Realm was up 42% over the past week and 113% over the past month to lead all ASX coal stocks for gains and soar to a market cap of $235 million.

 

Tigers Realm Coal share price today: