News

March 26, 2009

London Mining’s Strategy Of Sticking Close To Its Customers Makes A Lot Of Sense In These Troubled Times

By Alastair Ford

How depressed should you be right now if you’re in the business of iron ore mining? The answer to that question largely depends on who your customers are, current and future. Thus expectations across the industry are that prices will fall by around 30 per cent this year as demand drops away. Negotiations between the major producers and the major buyers are likely to come to a head in a few days, as the traditional sales contract runs April to April, and once again it’s a buyer’s market as the likes of Vale, Rio and BHP are under pressure to cut prices to Far Eastern steelmakers. The spot price is under pressure too, exacerbated by increased selling from those reneging on fixed contracts, according to recent commentary from London broker Fairfax, which notes that in Australia spot sales are reported to have increased by 50 per cent over the last six months.

So, uncertain times for iron ore, at the top end at least. But slightly further down the food chain the picture looks decidedly more mixed. Some companies are even on the hunt for deals - companies like London Mining, which, under the stewardship of new boss, managing director Graeme Hossie, has just acquired an iron ore mine and a concentrator plant in China, in a joint venture with US-based Wits Basin Precious Minerals. And there’s certainly no air of gloom about the state of the iron ore...