News

January 29, 2009

Iron Ore Prices May Weaken This Year, But Not Enough To Stop Progress At Northland's Tapuli Project In Sweden

By Alastair Ford

There can’t be too many people out there watching the up-coming round of iron ore price negotiations in the Far East with anything other than trepidation. Not on the mining side, at any rate. This week Kazakh-based metals conglomerate ENRC announced that the Russian buyer, Magnitogorsk Iron and Steel Works, had managed to push through a 41 per cent price reduction for purchase of the company’s iron ore. The price paid will now be US$50 per tonne, as against last year’s US$85 per tonne. Stomach-churning, perhaps, for anyone who’d got used to the recent double digit moves in the other direction. But actually, not altogether unexpected. According to broker Fairfax in London, market participants are forecasting a price cut across the sector of somewhere in the 30 per cent to 50 per cent range. Though it bears no formal relation to the industry’s big iron ore pricing negotiations which are undertaken by key players BHP Billiton, Vale and Rio Tinto, the price set by ENRC’s deal with Magnitogorsk will at the very least serve as a point of reference for them.

The directors at Northland Resources will be one group of people paying particularly close attention to the price negotiations over the coming months, as the company is likely to be publishing a pre-feasibility study on its Tapuli iron ore project in northern Sweden in mid-May. By then, we’ll know for better or for worse about the new benchmark pricing, and Northland’s board will be able to factor it into the decision it’ll then have to take about further funding for Tapuli. The overall...