Weaker financing, higher costs hit iron ore miners
PUBLISHED: 2 hours 30 MINUTES AGO | UPDATE: 2 hours 29 MINUTES AGO PRINT EDITION: 06 Aug 2012
Jamie Freed
The barriers to entry for iron ore miners are becoming “more extreme” as a result of weaker financing markets and rising capital costs, says Cliffs Natural Resources chief executive Joseph Carrabba.
“If you are in the business it is a great place to be,” he told delegates at the Diggers & Dealers mining forum in Kalgoorlie. “But it is also very difficult in a company like ours if you are trying to grow. The barriers to entry to this business on the supply side seem to be endless and are becoming more and more complicated as we go forward.”
Cliffs, which is based in the US, owns iron ore mines in the US, Canada and Western Australia.
Mr Carrabba said he believed the iron ore price, which is now around $US116 a tonne, had found support at a floor following its recent fall and should recover in the second half of the year as China pumped more money into infrastructure to boost economic.
But he said the financing of new projects was likely to remain more difficult.
“More recently with Europe now and the global financial crisis of the US the access to capital markets is really slowing a lot of dreams and a lot of ambitions and a lot of growth from the ground up and even in the larger projects we are all trying expand with right now,” he said. That’s a very difficult road to navigate.”
Mr Carrabba said the good news from expected delays and cost increases to iron ore projects was that it would keep pushing out the date at which the market expected supply and demand to come into balance.
He added that resource nationalism had also become a key risk facing project developers.
“All of the countries of the world are looking for new sources of revenue through taxation and royalties,’ he said. “The mining industry has been doing so well it has been singled out.”
But Mr Carrabba said Canada had retained an environment with regulations and taxation supportive of the mining sector.
The Australian Financial Review
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