Canadian iron ore miner Labrador Iron Mines Holdings (LIM) said it has halted mining operations this year, as falling prices on the back of a surge in global supply hit smaller producers.
LIM, which operates in the Labrador Trough in Quebec, posted a loss of C$105.2 million ($98.6 million) for the year to March and said it would almost certainly have posted further operating losses this year given current low prices.
Iron ore prices have fallen about 30 percent so far in 2014 as a flood of new supply to main market China, fueled by an expansion binge among global miners, has overwhelmed demand.
Smaller miners are not able to achieve the economies of scale that have driven down production costs at companies such as Brazil’s Vale SA, and BHP Billiton and Rio Tinto in Australia.
“LIM is currently not planning for any mining or processing activity in 2014,” company president and chief operating officer Rod Cooper said in a statement on Wednesday. Subject to completion of financing, LIM plans to begin production from its bigger Houston iron ore mine in April 2015, said Cooper.
Australia’s Cairn Hill iron ore mine was shut late last month by its owner IMX Resources after falling prices crippled the 1.7-million-tonnes-per-year operation. The mine is 49 percent-owned by China’s Taifeng Yuanchuang International Development, which also holds a direct stake in IMX.
Ratings agency Moody’s Investors Service warned on Wednesday that falling iron prices would have the biggest impact on miners that rely solely on iron ore for revenue, as well as some mining service companies.
Morgan Stanley estimates the average cash cost of iron ore producers in Canada, equivalent to the 62-percent grade benchmark, is at $80 per tonne this year compared with just $38 for Rio Tinto.
Iron ore stood at $94.70 a tonne .IO62-CNI=SI on Wednesday. A recent Reuters poll of analysts pointed to limited near-term upside, with forecasts the price could fall as low as $80 next year.
Moody’s said lower prices were credit negative for single-commodity miners Fortescue Metals Group and Atlas Iron Ltd.
Each $8-per-tonne reduction in iron ore prices at current production, would cut Fortescue’s annual revenue by about $1.2 billion, or roughly 11 percent of 2013 revenue, it said. Atlas’ revenue would fall by about $90 million, or 9 percent of last year’s revenue.
Reuters
