Vale pips Rio Tinto in iron ore

Kalgoorlie Miner - - BUSINESS - Jake Lloyd-Smith

The global iron ore in­dus­try re­mains highly prof­itable as top min­ers’ costs are far below cur­rent prices, ac­cord­ing to Mac­quarie Wealth Man­age­ment, which says the man­tle of the “most valu­able” busi­ness has shifted from Rio Tinto’s Pil­bara to Vale’s pel­let op­er­a­tions.

More than 95 per cent of world­wide sup­ply gen­er­ates cash at $US60 a tonne, and even at $US50/t, up to 90 per cent of the mar­ket re­mains cash pos­i­tive, Mac­quarie said in a re­search note.

When ad­justed for qual­ity to al­low for com­par­i­son, as well as fac­tor­ing in ship­ping to China, Vale’s pel­let busi­ness “has re­placed Rio Tinto’s Pil­bara op­er­a­tions as the most valu­able iron ore busi­ness in the world”.

The global iron ore in­dus­try is dom­i­nated by a hand­ful of ma­jor pro­duc­ers, in­clud­ing Brazil’s Vale, BHP, Rio and Fortes­cue Met­als Group. While bench­mark iron ore fell slightly last year, it still av­er­aged al­most $US70/t, and Mac­quarie’s anal­y­sis high­lights how the top pro­duc­ers’ ro­bust mar­gins in­su­late them from any down­turn in prices.

China is the largest iron ore im­porter and a crack­down on pol­lu­tion has boosted de­mand from mills for higher-qual­ity ore and some forms of pel­lets. That’s been a boon for Vale, which is de­vel­op­ing very high-qual­ity de­posits.

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