Mount Gibson adopts Rio’s prices Friday, 29 May 2009 Kate Haycock
IRON ore miner Mount Gibson says it has taken up the benchmark prices negotiated between Rio Tinto and Japanese steel mills.
The company said today it had notified its existing long-term iron ore contract customers that it was adopting the prices hammered out between Rio and Japan’s Nippon Steel Corporation.
Rio’s prices with the Japanese have been set at US97c ($A1.25) per dry metric tonne unit for Pilbara blend fines and Yandicoogina fines, down 32.9% from last year’s record high prices, while Pilbara lump blend will be priced at $US1.12/dmtu, 44.4% lower than last year’s prices.
These prices equate to around $US62 per tonne for fines and $US72/t for lump.
Mount Gibson mines iron ore at Koolan Island off the Kimberly coast and Tallering Peak in Western Australia’s Mid West.
The Perth-based company scaled back operations at the end of last year after lower ore sales and reduced sales prices, which included some customers defaulting on long-term contracts.
The company also revealed late last year it was selling much of its production at cost.
At the same time, two Chinese companies – APAC Resources and Shougang Concord – bought into the company, raising $162.5 million in the process and giving APAC a 26% stake in the miner, and Shougang a 14.3% share.
Shougang and APAC have become Mount Gibson’s major offtake partners.
Mount Gibson managing director Luke Tonkin told MiningNews.net the benchmark prices would apply to those customers who did not default on their shipments and whose contracts had not been terminated.
“These prices refer to them, and it refers to our new customers on the first of July,” he said.
The company had retained some customers on a long-term basis and then was selling ore on short and medium-term contracts as well.
“Those differentials in prices that we were selling at a discount to the then-prevailing discount price are related to the transactions that we did when customers defaulted on their contracts,” he said. Additionally, Tonkin said the mixed prices would only apply until July.
“We set interim prices in place in April in any event, because the prices hadn’t been settled and we agreed with our long-term customers what those interim prices would be, and they are not too different to what has been settled by Rio Tinto, so there’s not going to be too much of an adjustment there,” he added.
Tonkin also said Shougang and APAC would gain a 10% discount on the iron ore bought from Mount Gibson.
“They get exactly the same treatment as all the other customers we have, other than that there is a 10 per cent discount on their ore,” he added.
Mount Gibson’s operations were performing as planned, Tonkin told MNn, with production increasing.
“It was a red October and things are looking much better,” he added.
“I think [the prices] are pragmatic and reasonable in today’s climate.”
GIR Price at posting:
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