Iron Mining Group Positioned as Answer to China Iron Ore Needs

01.08.2011– As the largest importer of iron ore in the world and the producer of more than a third of the world’s steel, all eyes are on China’s steel industry to kick off 2011. The Chinese have not made it any secret that they are not happy with the big three iron ore produces of Vale, Rio Tinto and BHP Billiton who have been openly accused of a monopolizing iron ore prices for their own benefit with no regard to the steel producers in China. Additionally, it has been made clear that the Chinese are working to shore up their steel industry infrastructure, looking to develop additional domestic mines and looking to other suppliers of iron ore which are more readily available for negotiation. While the intentions are to avoid the reliance upon Vale, Rio and BHP, the fact remains that Chinese iron ore import experienced a growth of 25% in November from October.

Last week, the iron ore international quarterly price settlements for January to March period were increased again last week; up by about 8%. It has also been reported that the Big Three have asked China’s steel mill to hike the Q1, 2011 contract prices by 7.6%. With floods in Australia, iron ore export bans constricting supply from India and a high worldwide demand for iron ore, China will more than likely be exhausting resources to acquire iron ore at the best prices possible for the foreseeable future to lessen the pressure on the margins of its steelmakers.

Raw material costs for the top ten steelmakers rose to 45% of net sales for the September 2010 quarter; an increase of 3 percent over the same quarter the year prior. As big miners continue to hold pricing power, it is anticipated that the ratio is going to continue to increase throughout 2011.

Even with China raising interest rates in an attempt to curtail inflation, the steel industry is still strong. Some may debate that it is stabilizing, and that may be true, but the demand is still high given the sheer volume of steel that the Country produces year over year. Internal changes will take years to have implemented, so the answer could very well be to look to smaller iron ore miners to meet supply needs.

Iron Mining Group, Inc. (OTCBB:IRNN, “IMG”) is a company clearly positioned to capitalize on the situation. Through its wholly-owned subsidiary, Chile Inversiones de Minerales, Ltda., IMG has acquired a portfolio mineral concession believed to contain more than 150 million metric tons of recoverable high grade iron ore across both iron sands and bedrock deposits. Notable, IMG owns 40 mineral concessions spanning more than 18,000 acres in the Atacama desert. Furthermore, the Company owns 50% of the La Serena Iron Sands Mine with plans to increase ownership to 70% via repayment of pre-existing project debt through the iron ore sales from the property. Finally, IMG is working closely with the municipal authorities in the city of Tocopilla to clean a contaminated 2km beach and bay which contain rich natural iron ore deposits and have been the victim of decades of iron ore waste dumped at port by the country’s mineral exporters. Equally important, IMG controls two port development projects in Chile’s Coquimbo region and is working to acquire similar opportunities in the Atacama region, giving IMG an upper hand in the infrastructure restricted Chilean iron ore markets.

Production, which is slated to begin in the first quarter of this year at the La Serena project, has the potential sales of over $150 million in 2011 and an overall total in excess of $9 billion based on geology and feasibility studies completed by the University of Santiago in 2009. In total, at current market prices, these three projects hold total mineral value in excess of $21 billion to be exploited over a period of approximately 15 to 20 years.

The fact that Iron Mining Group can be quickly into production of the much-needed iron ore gives IMG a glowing appeal, but the Company has secured the sales of the iron ore already, which is what sets IMG apart from other mining companies and throws them right into the mix as a player in the industry. And guess where it is going…to China. IMG has signed strategic joint venture agreements with several Chinese Steel Groups, which provide guaranteed long-term iron ore purchase agreements for 100% of available production. It doesn’t take a geologist or a seasoned mining investor to realize that Iron Mining Group has worked to put itself into a position as an answer to a global supply/demand scenario where it is a win-win-win situation for IMG, China steelmakers and IRNN shareholders as the Company takes this one aspect of their many projects into production.

Iron Ore May Jump to Record $250/Ton in 2011, Credit Suisse Says

Jan. 7 (Bloomberg) -- The price of iron ore, the key raw material for making steel, will average 21 percent higher this year and may jump to a record should anticipated supply growth be curbed, according to Credit Suisse Group AG.

The spot price of iron ore delivered to China including freight costs will probably average $178 a metric ton, Credit Suisse analysts wrote today in a report. That compares with the $147 a ton average for 2010, according to The Steel Index.

The world’s biggest iron ore exporters last year scrapped a custom of pricing cargoes in 12-month periods and switched most sales to quarterly contracts. A jump in prices this year will hurt steel producers already facing a surge in costs for coking coal, the other key raw material, as floods curb supplies in Australia.

“Supply-demand conditions look extremely tight” in the first half, Credit Suisse said. “Should supply failures occur, however, we could readily see iron ore spot prices spike through previous $200 a ton highs towards $250 a ton in the second quarter of 2011.”

The price rose 0.2 percent to $171.30 a ton yesterday, according to the Steel Index.

Quarterly sales contracts for some iron ore suppliers are calculated based on the average price over the preceding three months with a one-month lag.

The second quarter of 2011 will mark the peak in iron ore pricing as new supplies enter the market, particularly from the second half of 2012, Credit Suisse said. “However any delays to these expansions will further tighten markets,” it said.

Brazil’s Vale SA, Rio Tinto Group and BHP Billiton Ltd. are the world’s three-largest iron ore exporters. Rio and BHP both ship ore from operations in the Pilbara region of north Western Australia state.

--Editors: Tony Barrett, Alastair Reed.

To contact the reporter on this story: Jesse Riseborough in London at jriseborough@bloomberg.net

Iron ore spot prices to hit record in 2011

by Diana Kinch, Dow Jones Newswires, January 05, 2011 10:18AM

GLOBAL spot prices for iron ore are set to reach an all-time high in 2011, beating the 2008 record, set during the last commodities boom.

Market expectations are that the average annual spot market price this year will rise to $US153 to $US154 a tonne of iron ore fines with 62 per cent iron content, delivered to China, from $US146.70 in 2010, said Steve Randall, managing director of The Steel Index, a London-based reference price supplier.

The expected 2011 average will exceed the average of just below $US150 a tonne in 2008, according to Mr Randall. While spot iron ore prices towered to their highest ever at more than $US200 a tonne in March 2008 during the commodities boom, the 2008 average was brought down by lower prices later that year after the global financial crisis hit.

“The key factors for this year are higher steel output and steel prices,” Mr Randall said.

“Steel production in China will be stronger for the next few months. Steelmakers in the rest of the world are still recovering from the crisis, they’re not yet back to their 2007-8 levels. In the US mills are now putting up their steel prices like crazy.”

According to the Brussels-based World Steel Association, global crude steel output rose 5.1 per cent in November to 114 million tonnes, from the year before, but was still below historical levels, indicating further output recovery is on the way. Global steel demand is expected to improve by 5 per cent in 2011.

Iron ore supply hasn’t yet responded to higher demand levels, which could put upward pressure on iron ore prices, Mr Randall said.

“New iron production capacity will come on stream only at the end of 2011, in both Brazil and Australia,” he said.

In addition, India’s continued ban on iron ore exports from Karnataka state, designed to preserve supplies for domestic steelmakers, has also pressured supplies, according to the price provider. Brazil, Australia and India are the world’s three biggest iron ore exporting nations.

Problems with heavy rain and flooding in parts of Australia - said to be the worst in 20 years - have meanwhile had no direct effect on iron ore prices, Mr Randall said. The flooding is causing disruptions in the Australian state of Queensland, which principally is a producer of coal, not iron ore.

“However, (iron ore) prices are being affected by the sentiment. People believe the likelihood of more extreme weather is higher, with the possibility of more interruptions,” he said.

Iron ore loading at a Rio Tinto port in Australia’s Pilbara region was suspended for two days just before the end of last year due to a cyclone warning.

Spot iron prices rose US90c Tuesday to $US171 a tonne, making for a $US6 increase in the past month, according to The Steel Index.

According to Pedro Galdi, Sao Paulo-based analyst with SLW Corretora, Australia’s climatic problems may temporarily affect iron ore prices as the floods are coinciding with Brazil’s rainy season, which normally reduces the South American nation’s iron ore exports in the first quarter.

“The Australian iron ore industry is not immune to weather-related problems,” Mr Galdi said.

Brazilian iron ore exports in 2010 expected to exceed US$20 billion

Rio de Janeiro, Brazil, 4 Jan – Brazil is expected to have ended 2010 with exports of iron ore totalling over US$20 billion, the vice president of the Brazilian Foreign Trade Association (AEB) said in Rio de Janeiro cited by the –Brazilian press.

"Even the soy group – beans, bran and oil – did not reach that amount,” said José Augusto de Castro, adding that mining company Vale, which is responsible for around 80 percent of iron ore exports, became Brazil's main exporting company.

Augusto de Castro added that if conditions seen in 2010 were to continue this year, iron ore exports could total US$23 billion, or 38 billion reals.

Augusto de Castro said, however that he was concerned about the future of the European economy if there was a drop in demand, “that automatically affects Brazil as China buys raw materials to produce and sell to Europe.” (macauhub) 

Tangshan imported iron ore prices stay steady

It is reported that imported iron ore prices in Tangshan market remain steady. Miners’ offer for 63.5/63% Indian fines softens a little at USD 177 per tonne to USD 178 per tonne and that of 59/58% Indian fines is quoted at USD 144 per tonne to USD 146 per tonne.

Big steel mills still hold fence-sitting attitudes. Mills in Tangshan region hold an average of 45 days to 50 days stocks. Steelmakers express that buying activities would resume after the New Year’s Day. The majority of them believe steel prices would hold stable then, with tight supply seen in futures market and hard purchases for domestic iron ores.

In spot market, 63.5% Indian fines is posted at CNY 1300 per tonne to CNY 1320 per tonne, 58% Indian fines is offered at CNY 1000 per tonne to CNY 1020 per tonne, PB fines is fixed at CNY 1230 per tonne to CNY 1250 per tonne, 63.5% Brazilian coarse fines is settled at CNY 1300 per tonne to CNY 1320 per tonne.

(Sourced from www.Mysteel.net)

Monday Market Monitor - Iron Ore - WEEK 52 - Stable on a high note

Spot prices of Indian iron ore fines remained stable last week albeit at high note. The transactions remained thin as most of the buyers stayed away combining festive mood and their wait an watch attitude.

The prices having reached nearly USD 177 per tonne to USD 178 per tonne CFR in December riding piggy bank on constricted supply from India leading to mills hiking prices to procure cargoes.

While many are restocking for better prices, some others are very cautious, saying the prices are already very high and huge imports will increase the risk accordingly if the domestic steel prices continues negative trend as exhibited in the penultimate week before New Year.

However this did not dampen the spirits as the traders remained resilient in anticipation of better prices in 2011.T

Incidentally, Chinese iron ore import clocked a resounding growth of 25% in November from October. This sounds paradoxical when the YoY figures saw a drop of 0.9% in January to November 2010.

At the same time changeover to quarterly pricing mechanism has enhanced miners’ leverage over prices. They can control the price trend by reduce supply in short run. It’s learnt that the 3 biggies has asked China’s steel mill to hike the Q1, 2011 contract prices by 7.6%.