The winners will likely be the big producers that can afford to sit out the tough times and wait. There will of course be winners and losers. However, it does not spell the end for iron ore investments in Africa. In August, the company declared force majeure on an expansion project in Liberia due to risks from the disease. In August alone, London Mining got a fresh credit facility from two banks, while African Minerals and Bellzone received cash injections of tens of millions of dollars from Chinese partners.Ĭasting a further pall on proceedings, the Ebola outbreak in Liberia, Sierra Leone and Guinea also risks further crippling their fragile economies, as the movement of goods and services seizes up.Įven for ArcelorMittal, the number-one steelmaker in the world and owner of several iron ore mines in Liberia and Guinea, current conditions pose challenges. All three miners have been seeking fresh funding to relieve some of the pressure on their balance sheets. This may not be too big a problem for companies like BHP Billiton and Rio Tinto, which benefit from vast economies of scale that allow them to remain profitable even at iron prices of around $30/tn.įor smaller companies like African Minerals, London Mining and Bellzone, which operate a comparatively tiny portfolio of mines at much higher cost, a sustained fall in the iron ore price is a far harder squall to surmount.Īfrican Minerals and London Mining operate mines in Sierra Leone, while Bellzone is in Guinea. So much so, in fact, that Goldman Sachs, the New York-based investment bank, said 2014 would come to be seen as “the end of the iron age”. Now, with inventories at Chinese ports close to record levels, coupled with a seasonal fall in demand, prices have headed south. In response, iron ore producers invested in new mines, thus ensuring a supply shortfall would be replaced with a glut. Prices jumped from $25/tn to $170/tn by the end of the decade as China built the skyscrapers, roads and bridges needed to serve its rapidly expanding economy. The sharp fall in prices evident this year is in some ways the corollary to the boom years between 20. Since the beginning of the year, the price of seaborne iron ore has fallen 37% to just over $84/tn in September. The combination of reduced demand and oversupply is pushing prices down. From Guinea to Angola, mining projects set up to feed China’s seemingly insatiable appetite for raw materials face an uncertain future.ĭemand from the world’s largest consumer of iron ore is now cooling, and the determination of the three biggest producers – Rio Tinto, Vale and BHP Billiton – to plough ahead with expansion plans is bad news for smaller rivals, many of whom have chosen Central and West Africa’s undeveloped – and thus higher cost – deposits as their way into the mix. Now, as Sundance courts fresh investors to shore up its dwindling cash reserves while iron prices fall, the prospects look bad for the construction of a $5bn railway needed to make the mine economical.Īcross the continent, a similar pattern emerges. Three years ago, the Mbalam mining project, spearheaded by Australian explorer Sundance Resources, was hailed by Cameroon’s President Paul Biya as a potential game changer for the Central African country. It is an ominous portent for an iron ore project billed as transformative for the country. High above the canopy of trees, dark clouds start to gather.
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