SYDNEY, Feb 2 (Reuters) - Australia’s BC Iron Ltd is withdrawing from a joint venture in Brazil aimed at expanding its mining operations overseas due to the downturn in ore prices, Cleveland Mining Co Ltd, its partner, said on Monday.
With iron ore prices about half the level of a year ago, BC Iron and other miners have managed to stay profitable mainly through a weaker Australian dollar, cheap freight rates and lower costs associated with a drop in oil prices.
“In light of market conditions, BC Iron has indicated its intention to withdraw from the fifty-fifty alliance between the companies over the Bahia and Minas Novas iron ore exploration projects in Brazil,” Cleveland said in a statement.
BC Iron was not immediately available for comment.
To combat falling ore prices, BC Iron cut dozens of jobs in December at its Nullagine mine in Australia, operated as a joint venture with Fortescue Metals Group.
BC Iron sold 1.2 million tonnes of ore at an average price of $60 a tonne over the last quarter. It is targeting all-in costs of between A$54 ($42) and A$61 ($48) per tonne for the 2014/2015 fiscal year.
Iron ore lost more than 10 percent of its value in January, stretching a 47 percent drop in all of 2014.
Benchmark 62 percent grade iron ore for immediate delivery to China .IO62-CNI=SI stood at $61.70 a tonne.
For its part, Cleveland said it intended to divest the Brazilian iron ore holdings into a separate company so it can focus on gold mining.
The world’s biggest iron ore suppliers, led by Vale , Rio Tinto and BHP Billiton , have been increasing output by tens of millions of tonnes to win market share from smaller producers such as BC Iron and miners in China.
This, coupled with slowing demand in China for imported ore, is driving down the price, according to analysts.($1 = 1.2832 Australian dollars) (Reporting by James Regan; Editing by Alan Raybould)