Monsters of Rock: The one where the mining gods smile on Australia
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Some great news for Australian iron ore miners today, who are all up on the double whammy that — surprise, surprise — there are more issues at the eternally cursed Simandou development in Guinea and that Vale has again chopped down its guidance.
The Brazilian iron ore giant looks set to remain the world’s second largest iron ore exporter behind Rio Tinto (ASX:RIO) in 2022, clipping its calendar year guidance from 320-335Mt to 310-320Mt.
It suffered a big 24% fall in nickel output as well, but Vale’s biggest impact will be in the iron ore space, where it alone accounts for around a fifth of the seaborne trade.
The company has long held plans to ramp up output to 400Mtpa, a run rate it was supposed to hit this year but now has designated as a “medium term” target.
Those plans have looked risible in recent years as it has struggled to ramp up after a major dam tragedy at its Brumadinho operations in 2019.
Rio based Vale increased production 17% QoQ to 74.1Mt, but says a stockpile adjustment, the sale of its 3.5Mt Midwestern mining system and “value over volume” philosophy amid current market conditions will see it drop guidance.
That last part means prices are too low for Vale to justify such a radical ramp up in supply. Whether the Chinese will be so scrupulous remains to be seen.
They are clearly at an impasse with the Simandou mine though, after Reuters reported the Chinese-backed SMB Winning Consortium had placed its workers on annual leave amid a halt to proceedings called by the Guinean Government.
Singapore futures charged 3.56% to US$100.85/t today.
Iluka (ASX:ILU) shares lifted over 7% ahead of a meeting for shareholders to decide on the demerger of its Sierra Rutile business later this week.
Behind the lift, aside from a broader run for the materials sector (up 2.43% at 3.35pm AEST), was an uptick in mineral sands pricing that is continuing the strong run for the ASX 100 player.
Zircon sand prices hit US$1910/t in the June quarter, up 25% on a year earlier, with another US$140/t lift from July 1. All of Iluka’s sales are fully contracted for the next three months, indicating the competition for supply.
Rutile pricing meanwhile rose 17% to US$1506/t, well above long-run industry price forecasts of US$1254/t.
Iluka turned over $540.9m in mineral sands revenue in the June quarter and $954.9m in the first half, a massive 29.8% lift on a year earlier on better prices and a combined 22.6% rise in production across its zircon, rutile and synthetic rutile businesses.
The mineral sands and rare earths company boasted net cash of $600m on June 30 after raking in $349m in free cash flow, but will face headwinds on costs which will rise by $55m to $660m for 2022, 65% of that due to fuel.
Bellevue Gold (ASX:BGL) has taken another step towards delivering its namesake 200,000ozpa gold mine up in WA’s northern Goldfields after locking renowned plant builders GR Engineering (ASX:GNG) to design and build the processing plant at the remote mine site.
BGL says it has locked in 90% of its costs on contracts or tenders already, an important point at a time of rapid cost escalation across the construction market in Australia.
The deal has come in at a fixed price of $87.8 million, $7.5m of which Bellevue can pay in shares.
In other biggish boy mining news today Panoramic Resources (ASX:PAN) hit commercial production at its Savannah nickel mine in the Kimberley.
Panoramic, which now boasts IGO (ASX:IGO) as its main shareholder after the nickel miner’s takeover of Western Areas, expects to produce 6600-7100t of nickel in concentrate in FY23 along with 4100-4500t of copper and 400-500t of cobalt at cash costs of $7.30-8.30/lb.