Iron ore shudders as China absorbs Africa

Advertisement

From Reuters:

Chinese steel company Shandong Iron and Steel Group said it had acquired the remaining 75 per cent stake in the Tonkolili iron ore mine in Sierra Leone from the mining company African Minerals for over $170 million.

Shandong now has 100 per cent of equity in Tonkolili, and will also own the associated infrastructure company African Port and Railway Services, it said in a press release.

Shandong will provide further funding including $600 million to progress Phase 2 of the Tonkolili Project, which will see production lifted to 25 million tonnes a year.

…Tonkolili is the second largest iron ore mine in Africa and has one of the largest magnetite deposits in the world.

Shandong said it intended to return the mine to full production and protect the assets against the imminent wet season.

Well, that’s not good news for anyone. Shandong is a state-owned enterprise and African Minerals was a very high cost producer before it went under (roughly $10 higher than Atlas).

There is no way that Tonkolili is profitable at current or prospective prices. Perhaps it is less loss-making than some of Shandong’s own Chinese mines and could displace some of that, but either way reopening it and adding 25 million tonnes to seaborne production shows just far China inc, is prepared to go to demolish the iron ore price.

Advertisement
About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.