Iron ore price drop now testing mettle of mega miners
By James Regan
SYDNEY Dec 16 (Reuters) - Tumbling iron ore prices have already forced smaller miners to close, but forecasts of further deterioration could test the staying power of even the lowest-cost, mega-miners still turning a profit.
Iron ore .IO62-CNI=SI stood at $37.50 a tonne, according to The Steel Index (TSI). It touched $37 on Friday, the weakest since TSI began compiling data in 2008.
"We could easily see the price to go to $30 a tonne," said MineLife analyst Gavin Wendt.
Top producer Vale has a break-even price of $33.40 a tonne, according to Citi, while the next biggest, Rio Tinto and BHP Billiton BLT.L> stand at $29.20 and $29.40, respectively.
The other large producer, Fortescue Metals Group, has put its break-even costs at around $37 a tonne, dangerously close to the current price.
"At least the big three, are making an all-in net cash margin of $5-9 per tonne," Citi said in a note. "FMG (Fortescue) is just about breakeven and everybody else is burning cash."
BC Iron Ltd last week suspended its Nullagine mining joint venture with Fortescue as it could no longer mine ore for less than the selling price. Continuación...