Interesting article about CAS and the overall IO prices in Brazil.
On a personal note, disappointed in the price drop in recent weeks. Expected some weakness due to the overall market conditions throughout September but feel this is well overdone.
ASX-listed iron ore groups operating in Brazil and selling to domestic pig iron ore producers are being insulated from the worst impacts of the 42 per cent collapse in seaborne prices for the steelmaking raw material.
So much so that Centaurus Metals is now planning to develop its Candonga project in Brazil, with first production from the low-cost operation possible in April.
Meanwhile, Crusader Resources is tipping an increase in its gross profit from its Posse operation in Brazil from $5.9 million in the June half to $6.5m in the current December half.
Posse supplies regional Brazilian pig iron producers from its mine gate, which is also the plan with the Candonga project. Demand for their product is driven more by internal Brazilian demand rather than the supply/demand picture in China.
A wall of new supply from the Pilbara and patchy economic growth in China has driven seaborne iron ore prices sharply lower this year, with the retreat from $US135 a tonne to $US77.70 this week testing the viability of all but the lowest-cost Australian producers.
Prices for domestic iron ore supply in Brazil have been hit as well, but not to the same extent. Because there is no posted price for internal iron ore sales in Brazil, it is estimated producers are receiving $60-$70 a tonne.
Crusader executive director Paul Stephen said while there had been a 10 per cent price fall in the last month, the Brazilian domestic iron ore price had been amazingly stable in the past year.
“There has been nowhere near the same magnitude of price swings that there has been in the international trade,’’ he said at the Resources Rising Stars conference on the Gold Coast.
Crusader’s Posse project also enjoys low costs of production of about $10 a tonne. Centaurus’s Candonga project is also forecast to be a low-cost producer, with estimated mine gate operating costs of $14.90 a tonne.
Centaurus managing director Darren Gordon said the low costs reflected low strip ratios, simple processing and lower labour costs than in the Pilbara.
CAS Price at posting:
30.0¢ Sentiment: Buy Disclosure: Held
