There has been much chatter that iron ore prices could hit $US100/t in the wake of the Vale tailings dam disaster.
The reality is that it is impossible to gauge at this point as there is no certainty if the unfolding Vale response to the disaster, and that of the Brazilian government, will create a deficit in seaborne supplies or not.
Added to that is the uncertainty around whether Australia’s big three of Rio Tinto, BHP and Fortescue will abandon their production constraint and chase the higher prices (the 62% iron index price got to $US86.65/t ahead of the Lunar Year shutdown, up from the low $US60s in early December, and the $US75/t that prevailed before the dam collapse).
If they do – and they certainly have the capability – prices will be capped and the chatter about $US100/t prices will remain just that.
What is more certain is that for some iron ore producers, the price is already at $US100/t. We are talking about the producers of the premium 65% stuff, including Vale itself.
In the Australian context, that means Mount Gibson (MGX) and its $175m restart of the Koolan Island iron ore mine in the Kimberley region of Western Australia.
After repairing the seawall, and moving on Eric the crocodile, Mount Gibson is all set – weather permitting – to make its first sales at the end of March.
It will (again) be Australia’s highest-grade direct shipping hematite mine from a total reserve of 21mt grading 65.5% iron. On pre-Lunar New year pricing, 65% material was priced at a little bit more than $US100/t.
It’s why Mount Gibson shares have rocketed from 50c at the start of the year to 68c yesterday, valuing the company at $760m.
Plus, eager investors await next week’s presentation from Breaker Resources and Peel’s exceptionally high-grade zinc zone augurs well for maiden resource. Read more +