INTERVIEW-Australia Gindalbie aims to triple iron ore output 31 MAR 2010 11:33:56
* Gindalbie says to hit full iron ore stride in 2010 * First output starts next year from new mine * Some miners may struggle under new pricing system
By James Regan SYDNEY, March 31 (Reuters) - Australia's Gindalbie Metals expects to triple iron production to around 30 million tonnes a year by 2020 from mining operations set to start next year, the company's top executive told Reuters. "We've got a plan to start producing in 2011 and by 2020 we will complete our ramp up to 30 million tonnes per annum," Gindalbie Managing Director Garret Dixon said in an interview. Gindalbie holds an agreement with China's No. 2 steelmaker, Angang Steel <0347.HK> <000898.SZ> (Ansteel), that could deliver nearly 900 million tonnes of iron ore over three decades once its operations in Western Australia state's Mid West iron belt are in full swing. [ID:nSGE62T041] Based on last year's iron ore fines price, the agreement is worth $580 million a year, increasing to more than $2.1 billion a year at the project's maximum production rate, Dixon said. "We're starting at 10 million tonnes next year and will progressively increase after that," Dixon said. First production from Gindalbie's Karara mine and ore processing project -- 8 million tonnes of high-grade concentrate and 2 million tonnes of direct shipping ore -- will be shipped to Ansteel via the existing Indian Ocean port in Geraldton, 400 km (250 miles) north of Perth. A second larger port, proposed in nearby Oakagee, is needed to allow the company to maximise production, according to Dixon. The state's political leader, Colin Barnett, this week said the project was vital for Western Australia and his government was committed to commissioning the port in five years. Iron ore is turning to gold in Australia for those able to mine it and transport it to a port for shipping overseas. All but a fraction of Australia's iron ore is mined 1,200 km (750 miles) north in the established Pilbara iron region, where Rio Tinto , BHP Billiton , Fortescue Metals Group and Atlas Mining are forecast to produce a combined 440 million tonnes this year. Dixon also said the industry-wide shift to quarterly iron ore pricing, set to start on Thursday, replacing four decades of annual fixed-prices, could spell trouble down the line for miners selling lower grade ores. Iron ore prices are typically set based on a richness of 62 percent iron, with premiums and discounts attached depending on individual grading. Some producers will struggle to turn a profit if iron ore prices contract in a market downturn under the new pricing structure, he said. Gindalbie was in a better position than most producers, due to the high iron content of its ores. Iron ore prices worldwide are set to rise as much as 90 percent for April-June shipments over last year's annual price following moves by world No.1 producer Vale and BHP Billiton persuade steel mills to make the switch.[ID:nSGE62T02E] "We don't have to go out and negotiate ourselves, we just need to encourage Rio and BHP to go for it," Dixon said. "We also get a premium to their prices, an adjustment for our higher quality grade of 68 percent iron ore," he said. "It's very good for us, because what we see in the market is that in the good times you can sell anything. But when times get tougher, premium products still sell." Citi commodities analyst Alan Heap has warned that an iron ore supply glut could be as little as two years away.
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