Iron Ore Story: New Millennium MentionedI saw this story on another site. Worth reading. The source isn't mentioned.
LOOMING IRON ORE CRISIS IN INDIA AND CHINA:
Iron Ore shortage in China and India
It appears that the commodities run over the past years has seen a huge run up of new discoveries and new supply developments in COAL, NICKEL, COPPER, MOLYBENDUM, URANIUM, PLATINUM and most other conceivable metals. However one commodity that exploration and mining companies have not touched over the past 20 years is the IRON ORE market. World production of iron ore grew by 12 per cent in 2006 to reach 1.5 billion ton. This was a fifth consecutive all time high. Output increased mainly in the four major producing countries Brazil, China, Australia and India. China produced 276.4 Mt (on a comparable grade basis) or 19 per cent of the total world production in 2006. China is now the world's second largest producer, behind Brazil but just ahead of Australia.
International iron ore trade also reached a new record level in 2006 as exports increased for the fifth year in a row and reached 759.1 Mt, up 6.1 per cent. These figures include all export trade including intra-CIS trade. Brazil managed a strong growth to 246.6 Mt but Australia is still the leading exporter at 248.4 Mt. China was of course the most important importing country, accounting for 43 per cent of world iron ore imports.
The iron ore industry has been consolidating more or less continuously since the 1970s. The three largest companies, CVRD, Rio Tinto and BHP Billiton, together control 35 per cent of the global market. After a period of limited M&A activity during 2004-2005, the possibility of an extended period of high prices together with both mining and steel companies having coffers fully loaded with cash triggered another M&A wave in 2006 which has continued into 2007.
Over the past 20 years, no new North American Iron Ore mines that have been put into production and has caused a shortage of iron ore supply with the recent building growth in China and India.
A few existing Iron Ore Mining Companies that Operate in Canada consist of the following companies.
Quebec Cartier Mining (Private)
Iron Ore Company of Canada (Subsidiary of Rio Tinto)
Labrador Iron Ore Income Fund (T.LIF.UN Market Capitalization: $1.5 Billion)
Wabush Iron (taken over my Arcelor Mittal from India)
Baffinland Iron Mines (T.BIM Market Cap:$300 Million)
All of the Iron Ore being produced at present has been locked up in long term contracts, mainly for local steel production and Asian demand. The current Iron Ore crisis is looming very large and very few mining executives have failed to take note. Some of the recent headlines in the Asia Pacific region are being made in the iron ore industry. Due to lack of space, this article will highlight some of the headlines that are making the news in Asia and are posted on
www.miningpost.com (under the iron ore section)
China, India to sign MoU for cooperation in iron & steel sector (English)
| NEW DELHI: As leading steel utilities embark on major capacity expansions and need for coking coal shoots up, both India and China have decided to join hands in extending cooperation in iron and ste...
Industry association calls for iron ore reserve (English)
(Agencies) | Updated: 2007-11-26 15:51 | China's steel industry, the world's largest, is lobbying the country's central government to establish a national iron ore reserve to secure supplies of the ra...
China's hunger for iron ore is pushing up shipping rates (English)
Breaking records can become monotonous after a while. The Baltic Dry Index, which tracks the costs of shipping "dry" goods such as iron ore, coal and grain around the world, dipped this week after hit...
China steels itself to secure huge iron-ore supplies (English)
| THE market spotlight may soon focus on a Chinese stake in the world's fourth largest iron-ore producer, Anglo American, as investors watch how China will respond to BHP Billiton's massive bid for Ri....
Iron ore key to bid (English)
| A takeover of Rio Tinto by BHP Billiton would create the world's biggest producer of valuable iron ore, analysts say. | The prospect of eclipsing Brazilian iron ore group CVRD was a likely key attra...
China to take half of BHP's iron ore (English)
| CHINA is expected to take 50 per cent of BHP Billiton's iron ore this year, compared to 20 per cent in 2002. The mining giant's iron ore sales into China will total $5,293 million in the second half...
The best illustration of where the Iron Ore market currently sits in China is illustrated by this Reuters story:
Farmers fish for iron ore
October 23, 2007
It may not have the allure of trout fishing, but Chinese farmers are cashing in on the world metals boom by fishing with magnets for lumps of iron ore in local streams.
“It sounds unbelievable, but it really happens in many mining areas, including mine,” said a manager of a mine in the eastern province of Anhui.
“They tie magnets to steel wires, and fish for waste iron ore in the streams.”
Steel mills are happy to buy their “catch”, since rapidly growing output has strained mines. – Reuters.
CURRENT PROJECTS UNDERWAY IN CANADA:
Over the past twenty years, many large Iron Ore deposits have been sitting idle waiting for the economics of the industry to kick in. With the current price of Iron Ore and the expected increases in 2008, many of these deposits have become economic elephants. At present, there is only one new Iron Ore mine that is near production stage and very few known deposits that are large enough to make them economic. Here is a summary.
ADVANCED STAGE DEVELOPMENTS:
Consolidated Thomson Iron Ore: T.CLM $6.25 per share and market cap $500 million
Resource: 638 million tons 29.8% Fe
This company is developing their Bloom Lake Iron Ore Deposit located in Northern Quebec. Their deposit consists of 638 Million Tones of Magnetite Iron Ore at an average grade of 29.8%. CLM is in the final development stages and is a very near term producer. The interesting story behind CLM is two years ago a Merchant Bank (www.forbes&manhattan.com) took over CLM when the market was valuing CLM at under $5 million ($.15/per share). This company has since seen its iron ore deposit developed to the feasibility stage and the company has a current market capitalization of close to $500 million for their 638 million ton deposit.
In late November the company announced that preliminary work to construct access and service roads, hydro power and site cleaning had begun.
This is the most advanced stage Iron Ore development in Canada and thus the market capitalization of $500 million for the company.
EARLY STAGE IRON ORE DEVELOPMENTS:
Other Canadian Iron Ore deposits that are economical to develop consist of very few deposits and have recently seen a flood of investments to get the deposits developed. The following is summary of the other ongoing Iron Ore Developments currently underway and each company’s market capitalization: I have taken a summary of each company’s project from their websites:
NEW MILLENIUM CAPITAL:V.NML $.70 per share Market Cap $70 million
Resource :6 Billion tons 28% Fe
New Millennium is developing The Millennium Iron Range which is located along the Labrador Trough in Canada. Focusing on two neighboring deposits, LabMag in Labrador and KéMag in Québec, New Millennium Capital Corp. has demonstrated that the Millennium Iron Range is the largest undeveloped magnetite resource in the world, comparable in many respects to the well-developed Mesabi Iron Range in the U.S.A.
Although this is a low grade deposit it is very large and located close to infrastructure. NML is advancing this project towards a feasibility study with targeted production in 2013.
Labrador Iron Mines (T.LIR) Market Cap :Approx $123 Million, trading At $3.4/share).
Resource:100 Million Tons Direct Shipping Ore (LIR to earn 75% Interest.)
Labrador Iron Mines Holdings Limited has acquired interests (75%) in mineral claims and mineral licenses containing an estimated 100 million tons of high grade iron ore in northwestern Labrador that was formerly part of the iron ore reserves and resources established by the Iron Ore Company of Canada (IOCC) prior to the closure of its direct shipping operations in the Schefferville area. Between 1954 and 1982, IOCC shipped over 150 million tons of lump and sinter ores by rail to Sept-Iles (Quebec) for onward shipment to North American and European steel mills.
The former IOCC reserves and resources are considered to be historic resources and are not currently compliant with National Instrument 43-101. LIR plans to conduct a program of verification drilling and sampling together with a full feasibility study which will include a revised reserve and resource statement. Mining will be by open pit methods and broken ore will be screened and washed prior to rail shipment. LIR plans to initially ship 1 to 2 million tones a year of lump and sinter fine iron ores, possibly increasing to 5 million tones a year as additional deposits are developed.
Existing local infrastructure such as access roads, hydro-electric power, the 565km railway link between Schefferville and Sept-Iles and the services available in the communities surrounding the town of Schefferville are factors which contribute to the viability of the project
This company is at the very early development stage and has recently raised $45 million at $4 per share to develop their deposit. What makes their Iron Ore deposit economical at a size of only 100 million tones is the availability of the infrastructure including rail link to a shipping port and the high grade iron ore which will facilitate direct shipping of the ore..
ADVANCED EXPLORATION (V.AXI) $2.5/ per share and market cap of $130 million.
Resource: Approximately 5 Billion tons (50% interest)
Advanced Exploration an option to earn a 50% equity interest from Roche Bay plc in extensive mining leases at Roche Bay on the Melville Peninsula in Nunavut, Canada. Roche Bay's holdings cover one of the largest known magnetite iron ore bodies in the world. The deposits are in two large groups -- the Eastern deposits, which total an estimated 1.3 billion tones of ore, are five to ten kilometers from a natural harbor, and the Western deposits, totaling an estimated 3 billion tones of ore, which are some 120 kilometers away on the western side of the peninsula.
This project is very early stage and advanced Exploration is currently valued at $2.70 per share and has a market capitalization of $130 Million dollars. This project offers the benefits of large deposit that is very close to a port and would only require a shipping port and no railway would be required. However the deposit is not road accessible and would require float plane or barge access.
AUGYVA RESOURCES (V.AUV) $.30 per share and market cap $8 Million
Resource: 1 Billion tons (100% Interest)
Augyva Resource’s Duncan Iron Ore Deposit consists of a historical deposit of 1 billion tons at average 32% Fe grade. It is located along Hydro Quebec’s La Grande power Project in the Village of Radisson in Northern Quebec. A highway runs along the deposit and an airport is located 15 kilometers away. Magnetic Surveys have been done in 2006 and trench sampling was completed in 2006 which confirmed the Iron grades from historical drilling. A National Instrument 43-101 technical report has been prepared as per the companies website.
I understand that AUV is looking at various ways of developing this deposit in 2008 and plans to conduct drilling in the coming year. At the current valuation of $8 million, this deposit is not reflected in AUV’s share price and should peak some interest from Iron Ore players in market. I believe Iron Ore will be the commodity for 2008 and I have invested a large portion of my speculative money in AUV.
Another positive for AUV is that Goldcorp is set to develop their Eleonore Deposit near AUV’s Duncan Iron Deposit. Here is a summary of Goldcorp’s Eleonore Deposit
https://www.goldcorp.com/_resources/maps/07-11-26_Eleonore_Maps.pdfAlso here is an excellent map that shows the road access and the other projects in area surrounding AUV’s Duncan Deposit.
https://www.evertonresources.com/e/viewimage.asp?image=maps/large/Qc_jamesbay-area02_lrg.jpgSUMMARY:
Have a look at the above companies for a good play on Iron Ore for 2008. Unlike Uranium, Platinum, Nickel and Gold where thousands of exploration companies are searching for or developing mines, there are only a few players in the Iron Ore field. The ones that can bring their deposits to production within the next five years will stand to make huge gains. The current BHP offer for Rio Tinto is being fuelled by BHP’s appetite for Iron Ore and the huge demand from India and China. Look for the Iron Ore price to have a run in 2008 and for the industry giants to start taking over the early stage developers in order to satisfy the Asian demand for Iron Ore. At present AUV’s Duncan deposit represents the largest undeveloped Iron Ore Deposit and with Goldcorp developing a gold mine nearby, the logistics of developing Duncan into an Iron Mine are becoming more and more economic.