Free carry interest - Yeah they are - it is standard in every single frontier mining investment. China's approach to Africa has always been more "assisting your growth" than "aggressively force your hand". It's also why it has worked for China. On the minerals point, precious and base metals operations dont need massive scale infrastructure like iron ore / coal projects do so it's always easier with those.
Actually asset confiscation and force sell-down is a lot more realistic and costly than a mining tax because the former has a binary outcome. Also on that super tax, most analysts and finance teams we never even took it seriously, it was DOA. But with asset confiscation and force sell-down or going-back on their words and ask for more money and more equity as the project gets developed - that we see ALL the time. Sovereign risks are real and they have all been burnt more than once.
Security of supply - that was a 2007/8 argument, we haven't heard that from Chinese companies in a long time, w.r.t. coal or iron ore. Also my point earlier on the land bank, they can always just sit on it for "strategic purposes" but they know, who else is going to majorly compete with them for Australian iron ore, Im being realistic here.
i think that's where you and i (along with a few others on this forum) differ in opinion - Without someone spending 10+ billions into Africa, I genuinely cant see any major iron ore supply surge in the medium term to push iron ore price down to $50/t. I have actually been trying to think of who else could be the "new force" - I cant think of anyone.... Lets say China thinks that iron ore will stablise below $50 again without African iron ore, then even less incentive for them to sink in another $10billion into simdou. lol
Even coal prices have now stablised at $7-80/t mark and China has made it clear that this is where they want it to be, i dont see how iron ore would go back to below $50.....
To properly understand what happened the last 10 years, I think we need to break down what happened in the last cycle -
Pre 2006 - the major 3 had >85% market share, then China demand sent that limited supply into a frenzy (Im talking about $200+/t high prices), so Chinese companies went around and bought up everything they could at the peak of the cycle - the huge investment into iron ore caused a huge supply increase a few years later.
Consequently the major 3 lost their market control and the top 4 (with the newly emerged FMG) reduced their market share to only 45%. Of course they were p*ssed. Then they did what every other major market leader do, flood the market with aggressive expansions and drive out the smaller guys, that process took a few years. Now, they are almost back to where they were in terms of market share, with the inclusion of a 4th guy.
This time, major mining companies are all adopting a fiscally conservative capital policy; China, Japan and Korean steel makers are not on the market making big capital investments into iron ore. This time around, even though coal and iron ore prices have recovered, we are not seeing any major renewed interest in investing into new projects. I mean we havent really seen any major investments being announced this time around right?
Simandou - it may happen, but i just dont see any rush on the China side to sink another 5-10 billion - remember anti-corruption cleanse is still very much in action; capital-outflow is heavily controlled atm (most major overseas acquisition by Chinese companies have been halted because of this); iron ore price has recovered but it is still reasonable, definitely not enough for any one to step up and say it is so high as to warrant a $5-10billion dollar investment. Chinese SOE's senior team's ambition is not commercial, its political, their goal is to not to f&ck up then eventually move into a higher political position - they are not twiggy or Nev.
Not sure i understand your last point... Cost curve is to do with operating (cash) cost and it came down because all the fat from the boom market period have been trimmed (ie. things like fly-in-fly-out; $200k /year salary for truck drivers in Pilbara; and oil prices is like half of what it used to be). Capital cost wise (ie the huge upfront capital requirement) haven't come down that much if not gone up because new mines are located in more remote locations or have harder to reach mineral deposit.
FYI- i am just here to share some of my own experience and knowledge on certain part of this sector - i am not trying to make a predication on iron ore prices or FMG's share price in the near-term. lol.
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