Hi Eoin, Without trying to ask the (impossible): Can you shed...

Hi Eoin,



Without trying to ask the (impossible):



Can you shed any light on where you think the latest iron ore pricing issues may 'knock on' to other base metals? Can I assume the softening of all this will affect your 1/4'ly?

From Eoin:

"Iron ore hasn’t really fallen yet, whereas base metals have been savaged already. Nickel is mainly used in the steel industry and its price is 1/3 of what it was last year – I guess that tells you iron ore will fall when the prices are struck next year.



I was at a talk by David Hale “renowned global economist*” at an Austrade seminar yesterday. His opinion was that both China and India were going to slow growth, but still have growth rates in the 6-8% range next year. Their middle classes are still active and growing. He said the US economy was important but not essential to global economic growth. Indian exports went from $37 billion in 2000 to $159 billion last year. India plans to spend $108 billion from 2008-2012 on doubling its power capacity, and also plans $57 billion on roads in the same period, as well as increasing its expenditure on airports by 300%. Three years ago there were 5 million cars in India; annual sales are increasing and are now at 1.5 million.



This tells us that base metal commodity prices should hold up – and our particular situation in India is that we are selling at a fixed price which is protected for 3 months if LME falls below Cu $US3700 (then we talk). The smelter we sell to is 5km from the mine gate and we supply about 20% of their capacity: for the rest they have to import or rail over 800km – we are much cheaper and they will want to keep our supply.



Regards



Eoin Rothery"