Riley Iron Ore Mine - Progress, Photos and Calculations, page-1264

I dont think there is any point in VMS starting iron ore hedging now as the price is $137 a tonne after hedging would bring it down to about $115 or so a tonne , AR knows what he is doing better to leave the current arrangements and if iron ore heads back up to $200 VMS can then thing about hedging , I think fex did the hedging at the right time at $207 a tonne smart move , but for vms iron will hover around the$110 to $120 mark for at least 6 to months imo so will still make about $3 to $4 million profits on each shipment at current prices .

“Iron ore prices tend to be a little bit seasonal there are a lot of factors that lead into August, September, October and November that cause weakness.

“It is the time when the Chinese government normally start to curtail steel production and that coincides with a time when Chinese internal production of iron ore is probably at its highest, Brazilian production is probably at its peak and the Aussie production is pretty well at its peak.”

China has indeed curtailed steel production at faster than expected rates in the past two months, curbing demand for iron ore and triggering a 41 per cent slump in benchmark iron ore prices since May 12.

Wednesday’s price of $US137.85 per tonne ($186.86 per tonne) has Fenix well in front on the price fix and Morgan Stanley expects iron ore prices to average $US100 per tonne in the final three months of 2022 when Fenix will be shipping its last volumes under the fixed price deal.

Brierley was at Geraldton port this week helping to load Fenix’s iron ore onto a boat when contacted by The Australian Financial Review.

He was happy to talk but reluctant to celebrate the fact that sliding iron ore prices had made him look smart.

“We are not patting ourselves on the back that the iron ore price has fallen so far, we did not hedge 100 per cent of our production,” he said.

Fenix drives its iron ore 485 kilometres to Geraldton port; the sort of business model that has previously only been viable when iron ore prices are booming.

That has made the price fix a key plank in the company’s survival plan.

“What we tried to do was just use hedging as a protection tool, so we thought by hedging the amount that we did, we would almost cover our cost base for the month by just doing that and everything else would just be profit,” he said.

“It made perfect sense to us.”

As signals from China once again prompt Australia to consider whether iron ore’s best days are in the past, Brierley remains optimistic about the nation’s top commodity export.

“I think there is still reasonable times to come and that is because there hasn’t been a huge [iron ore] supply response this time around,” he said.

“Back in 2011 and 2012 when the prices were high, you saw these large increments of expansion coming through from Roy Hill, Fortescue’s Solomon Hub and then the Carajas region in Brazil went through a major expansion as well.

“This time around there has not been that same expansion and if you look at BHP, Rio and Fortescue’s [export volume] forecasts for this year, it is very flat.”