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Hellenic Shipping News – China’s Recovery ‘Underestimated’ As Iron Ore Imports Continue At Record Levels

29th September 2020 / Leave a comment

China continues to prove the market commentators wrong on the iron ore front, with the asian heavyweight’s imports still hitting record levels.

In the past three months China’s iron ore imports have climbed 20 per cent year on year, while year-to-date they are up 11 per cent compared to the previous year.

August imports were the third highest on record.

Guy Le Page, director and responsible executive at Perth-based financial services provider RM Corporate Finance, told Stockhead in May that “a lot of analysts are not bullish on iron ore” and that they’d “underestimated the recovery in China”.

And it was only in late August that Le Page pointed out market forecasters had started playing catch-up.

Mark Eames, non-executive director of emerging South Australian iron ore producer Magnetite Mines (ASX:MGT), agrees, saying market observers had missed the mark on both the demand and supply front.

“We’ve been talking about the same theme for the last 18 months, which is that observers have tended to be quite pessimistic about China’s prospects in iron ore,” he told Stockhead.

“A lot of people were forecasting that iron ore prices were going to fall from where they were 18 months ago, and in fact they’ve almost doubled.”

Eames said demand had risen from around 800 million tonnes up until mid-2017 to about 900 million tonnes in 2018 before hitting close to a billion tonnes last year.

“If you translate that, that extra 200 million tonnes of steel production requires effectively another 300 million tonnes of iron ore,” he said.

“So it was pretty clear from the steel production trend that there was going to be a major increase in iron ore demand.

“In fact, for July and August the imports have been running at an annualised rate of about 1.3 billion tonnes.”

This continued increase in demand is occurring amid declining shipments from major iron ore producer Brazil, which has been hard hit by the COVID-19 pandemic, as well as reduced production from the Australian majors.

UBS’ tracking of iron ore shipments from key producers in Australia, Brazil and South Africa showed that over the week to September 6, total shipments had fallen 7 per cent week on week to 24.5 million tonnes.

The slide was due to a sharp 16 per cent week-on-week fall in shipments out of Brazil, and Australian shipments remaining broadly flat.

Iron ore shipments
And over the last month a number of Chinese steel producers have restarted blast furnaces (BFs) that were “hot-idled” (temporarily halted when steel demand contracted) due to COVID-19.

“We expect producers to announce further restarts of BFs over the next few months due to operating issues caused by extended outages,” UBS said.

“We estimate in total ~22 BFs are being restarted around the world or ~30 per cent of the total idled. In our opinion, this is not a surprise given the time-constraints of hot idling and as demand is picking up.”

Le Page expects iron ore prices to remain above $US100 ($139) a tonne for “some time to come”.

Iron ore is priced on three grades: 58 per cent (low grade), 62 per cent (benchmark) and 65 per cent (premium grade). The higher the grade the more it sells for.

According to S&P Global Platts, the August average for 62 per cent and 58 per cent iron ore was $US122.53 and $US103.07 respectively. That’s a 46 per cent and 64 per cent increase, respectively, over the average prices in April this year.

Iron ore prices
Average monthly prices of 62 per cent and 58 per cent iron. Source: S&P Global Platts.

“Most observers were saying that China steel production would collapse … it’s actually gone up dramatically,” Magnetite Mines’ Eames said.

“It’s gone up by 26 per cent year to date on five years ago, and then when we look at iron ore supply from Fortescue, Rio and BHP, their iron ore production on the numbers for 2015, so five years ago, is up only 4.6 per cent.

“So essentially when you take into account grade changes and everything else, production of iron units is essentially where it was five years ago from those three players.”

High-grade players few and far between
There are very few juniors that can produce high-grade direct shipping ore (DSO), but there are a handful getting much closer to production.

DSO refers to minerals that require only minimal processing such as crushing before they are exported, which keeps costs low…..

“We expect iron ore prices to remain high for quite some time, due to expected increasing Chinese demand (driven by government stimulus) and likely continued supply constraints from Brazil,” managing director William Johnson told Stockhead.

Magnetite building market share
While high-grade iron ore is still very much in hot demand, the declining tonnes coming out of Australia’s iron ore rich Pilbara and from Brazil is seeing Chinese steelmakers increasingly blend low and high-grade ores or pivoting to processed ores like magnetite….

Full article here

Stockhead: LionOre founders among the canny investors climbing aboard at Salt Lake Potash (SO4)

6th June 2019 / Leave a comment

Special Report: The founders of LionOre International, the mining house acquired by Russia’s Norilsk Nickel for US$6.3 billion in 2007, have emerged as new backers of Western Australian potash play Salt Lake Potash (ASX: SO4).

Salt Lake announced this morning that it had received binding commitments to place 37.5 million shares at $0.54 each to raise $20.25 million, with the funds to be used to advance construction of its Lake Way Sulphate of Potash (SOP) Project near Wiluna in the WA goldfields.

The company said the placement was led by a consortium of cornerstone investors, including the LionOre founders, which had agreed to subscribe for shares worth $14.25 million.

The consortium also includes investors that took early positions in African-focused uranium explorer Mantra Resources. Mantra, which was listed on the ASX, was taken over by Rosatom for $1.02 billion in 2010.

Salt Lake managing director Tony Swiericzuk said the company was “delighted to have attracted such a group of investors at a pivotal time in the rapid development of the Lake Way Project”.

“We intend to collaborate closely with the consortium and expect to benefit substantially from the advice of its members,” he said.

“These are individuals that possess a wealth of management, global finance and project development expertise and bring access to very well established commodities marketing networks.”

The Williamson Pit at Lake Way hosts the highest grade brine resource in the country (Supplied).

The balance of the placement was taken up by Salt Lake’s largest shareholder, Swiss private bank and asset manager Lombard Odier, which subscribed for shares worth $6 million.

The placement was completed at the same price, $0.54, as Salt Lake shares last traded on the ASX before a trading halt was requested before the market opened on Wednesday.

Upon the resumption of trading this morning, the stock gained 7.4 per cent to $0.58.

At this price, the company has a market capitalisation of about $120 million.

Leading the potash pack

Salt Lake is one of a handful of ASX-listed companies seeking to pioneer the production of SOP, a premium grade potassium fertiliser, from Western Australian salt lakes.

It is well placed to take honours as the first to achieve commercial production, with construction well underway at Lake Way on the country’s first commercial scale on-lake evaporation ponds.

Construction of the evaporation ponds at Lake Way is nearly complete (Supplied).

These ponds will have a capacity of 1.8 gigalitres, enough to capture the total measured brine resource in the nearby Williamson Pit.

At 1.2 gigalitres grading 25kg/m³, this is the highest grade brine resource in the country.

Once construction of the ponds is complete, they will allow for the dewatering of the Williamson Pit, a process that will accelerate first production at Lake Way.

Salt Lake owns nine large salt lakes in the northern goldfields and has a long-term plan to develop an integrated SOP operation, producing from several, or all, of the lakes.

Specific uses for the funds from the latest raising include the development of on-lake infrastructure at Lake Way, paying deposits on process plant long-lead items, completion of feasibility studies and general working capital.

This story was developed in collaboration with Salt Lake Postash, a Stockhead advertiser at the time of publishing.

This advice has been prepared without taking into account your objectives, financial situation or needs. You should, therefore, consider the appropriateness of the advice, in light of your own objectives, financial situation or needs, before acting on the advice. If this advice relates to the acquisition, or possible acquisition, of a particular financial product, the recipient should obtain a disclosure document, a Product Disclosure Statement or an offer document (PDS) relating to the product and consider the PDS before making any decision about whether to acquire the product.

Stockhead – Potash stock guide: how the Pilbara could help feed the world

12th September 2018 / Leave a comment

The Pilbara region of Western Australia is best known for iron ore — and in more recent times goldand lithium.

But a group of pioneering ASX companies reckon it also has the potential to be a major hub for potash — a mineral salt that’s critical in plant, animal and human life.

There are some 30 ASX-listed companies active in potash, but it is not a well-understood industry.

Over the past year, 16 of 28 potash-related stocks tracked by Stockhead have made gains of 4 per cent to 263 per cent.

Potash comes from salts that contain potassium in water soluble form. It is used as a fertiliser.

There are two commonly used fertilisers – muriate of potash (MOP) and sulphate of potash (SOP).

MOP is the most common (around 90 per cent of the world’s potash) and is used on a variety of crops. However, the more chloride-sensitive crops like avocados, coffee beans and cocoa require SOP – which fetches $US270 per tonne more than MOP.

The global potash market is estimated to be around 75 million tonnes.

Demand is set to increase as the global population grows to around 8 billion by 2023.

Greg Cochran, the boss of Pilbara potash explorer Reward Minerals (ASX:RWD) told Stockhead an extra 100,000 to 150,000 tonnes of potash will be required each year.

Right now Australia imports all its potash from Canada, the Middle East and Europe. Australia’s MOP and SOP consumption is around 250,000 tonnes each year.

China and big plantation-focused countries in southeast Asia – like Malaysia and Indonesia – are expected to be the key contributors to demand growth.

The potash market is perhaps one of the most stable compared to other commodities, with the price difference between MOP and SOP remaining close to $US270 per tonne for the past three years.

Pilbara could rival world’s largest potash exporter

Reward Minerals' Lake Disappointment sulphate of potash project.

Reward believes the Pilbara could become the next Saskatchewan – a region in Canada that is currently the world’s largest exporter of potash.

Canada produced 12 million tonnes of potash last year and the bulk of that came from Saskatchewan.

Mr Cochran said director Michael Ruane saw the potential of the Pilbara early on.

“Mick saw it first, where he said: ‘this has the potential to be the next Saskatchewan’,” Mr Cochran said.

“That’s the potash potential of this broader region in which we operate up here [the Pilbara], and with the climatic conditions it’s ideal and it’s a lot closer than Saskatchewan is to Vancouver.”

Saskatchewan is nearly 1700km from Vancouver.

By comparison, Reward’s Lake Disappointment project is less than 900km from Port Hedland – which is where the company is planning to ship its SOP product from.

“I’m not talking just about Lake Disappointment, but other projects further inland, and we’ve got some really good insights into the geological potential that we as a company have learnt over the last 12 years,” Mr Cochran said.

“In fact, when we talk to government ministers that’s part of the conversation. There’s a dream there, this vision is big.”

A recent pre-feasibility study indicated Reward’s Lake Disappointment project will produce 9 million tonnes of SOP over a 27-year life.

One of the evaporation ponds at Reward Minerals' Lake Disappointment project.

Reward says it will be one of the world’s largest and longest-life brine SOP projects.

The who’s who of potash

Australia does not currently produce any of its own potash, but the bulk of the production will eventually come from WA.

Kalium Lakes (ASX:KLL) this week announced it has increased the measured and indicated resources for its flagship Beyondie SOP project in WA by 150 per cent.

This is expected to translate into a “substantial increase” in ore reserves, which is also due for an update this month, managing director Brett Hazelden told investors earlier this week.

Kalium’s share price has jumped 31 per cent to 46.5c since this time last year.

The Beyondie project currently has enough in reserves to mine 75,000 tonnes each year for more than 23 years.

Kalium is the closest to production, having already been granted the necessary mining licence and received approval for its mining proposal and mine closure plan.

The company expects to be able to start early construction works this year.

Kalium is also in a joint venture with BCI Minerals (ASX:BCI) on the Carnegie potash project, which is located about 220km east-north-east of Wiluna.

BCI diversified into salt, SOP and gold following the steep drop in iron ore price.

The company, which was once known as BC Iron, has witnessed a 15.6 per cent drop in its share price over the past year and is trading around 13.5c.

BCI is now selling off its Pilbara iron ore projects after it sunk to a $16.9 million loss in FY18.

The company can earn up to a 50 per cent interest in the Carnegie project by sole-funding exploration and development expenditure across several stages.

The Carnegie project lies directly north of Salt Lake Potash’s (ASX:SO4) Lake Wells project and Australian Potash’s (ASX:APC) project, which is also named Lake Wells.

Salt Lake also has another project near Wiluna called Lake Way.

Link here for full Stockhead article

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