CONFÉRENCE DES NATIONS UNIES SUR UNITED NATIONS CONFERENCE

LE COMMERCE ET LE DÉVELOPPEMENT ON TRADE AND DEVELOPMENT

TRUST FUND ON IRON ORE INFORMATION

IRON ORE MARKET 2008-2010

Geneva, June 2009

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CONTENTS

Page

SUMMARY 4
I. THE IRON ORE MARKET IN 2008 7
II. STEEL IN 2008 21
III. COUNTRY INFORMATION 25
IV. COMPANIES IN THE GLOBAL IRON ORE INDUSTRY 49
V. PROJECT REVIEW 62
VI. THE OUTLOOK FOR 2009 AND 2010 86
VII. SOME COMMENTS ON THE STATISTICS 91

ABBREVIATIONS 93
SOURCES 95

ANNEX TABLES
Table A1. Iron ore: World production (Mt) 96
Table A2. Iron ore: World exports (Mt) 99
Table A3: Iron ore: World imports (Mt) 101
Table A4: Pellets: World capacity, production and exports (Mt) 103
Table A5: Brazil: Iron ore monthly exports (Mt) 104
Table A6: China, Taiwan province of China: Iron ore monthly imports (Mt) 105
Table A7: Japan, Republic of Korea: Iron ore monthly imports (Mt) 106
Table A8: Iron ore: Prices to Europe 107
Table A9: Iron ore: Prices to Japan 109
Table A10: Iron ore: Representative spot freight rates (US dollars/t) 111
Table A11: Direct reduced iron (DRI): World production and capacity (Mt) 114
Table A12: Pig iron: World production (kt) 115
Table A13: Crude steel: World production (kt) 117
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SUMMARY

The steel industry is facing its worst demand downturn since the oil crisis of 1974-1975 and
the iron ore market is of course affected. The main reason for the fall in steel demand is that
steel is a key input in the construction, mechanical engineering and transport vehicle
industries, sectors that are among the hardest hit in the current global economic recession.
Price negotiations for iron ore were again drawn out and were not completely concluded at
the time of writing. The benchmark pricing system is under attack and its future looks bleak.

World use of finished steel products decreased in 2008 by 1.4 % to 1,197 Mt. Steel use fell in
the developed world, which entered recession earlier, while it continued rising in most
developing countries. In China, steel use increased by 2.9 %, and increases were also recorded
in other Asian countries and in Latin America. The recession has also led to a very large
slowdown in trade. Following a strong performance in the first nine months of 2009, the
volume of world trade in steel (average of exports and imports) declined by 20 % in the fourth
quarter from a year earlier. The reaction of steel trade in the current cycle has been much
stronger than during the past episodes of weak demand. This is the result of exporters’
reduced access to credit to finance shipments and the intensity and scope of the current global
demand contraction. World crude steel production decreased by 1.5 %, from 1345 Mt in 2007
to 1325 Mt in 2008. All regions except Asia experienced falls in production. In Europe,
production fell by 6.4 per cent and Africa experienced a decrease of 8.8 per cent. In the
Americas production declined with 4.9 % and in Oceania, production was reduced by 4.1 %.
Production in China increased by 1.9 per cent and the rest of Asia increased its production by
0.8 %.

In spite of falling demand in the final quarter, world production of iron ore grew by 3.6 % in
2008 to reach more than 1.7 billion tons. Output decreased in most countries but the fall was
more than offset by increases in the major producing countries, including Brazil, Australia,
South Africa and India. Developing countries accounted for a little more than 62 % of world
iron ore production in 2008 (almost exactly the same as in 2007), the CIS republics for 11 %
and the industrialised economies for 27 %. The share of the CIS republics declined slightly
from 12 % in 2007. The increase for the industrialised economies was due mainly to growth
in Australia. China produced 366 Mt (on a comparable grade basis), or 21 % of total world
production in 2008, down from 22 % in 2007. This makes China the largest producer in the
world, more than 15 Mt ahead of Australia.

International iron ore trade also reached a new record level in 2008 as exports increased for
the seventh year in a row and reached 882 Mt, up 7.8 %. Total iron ore exports have doubled
since 1999. Brazil’s exports increased by 4.5 % to 282 Mt in 2008. The increase was smaller
than last year and pushed Brazil back again to second place among iron ore exporting
countries. With over 300 Mt and an increase on 2007 of 16 %, Australia is now again
exporting more iron ore than Brazil. Indian exports grew for the ninth consecutive year and
the country is now, at 101.4 Mt, the third most important exporter. China is still by far the
world’s largest iron ore importer. In 2008, its imports were 444 Mt, an increase by 16 %
compared to 2007. Japan’s imports increased by a comparatively modest 1.1 % to 140 Mt.
European imports (excluding the CIS countries), which fell by 5.0 % in 2008, reached 164
Mt, corresponding to 18 % of world imports. Seaborne iron ore trade is estimated to have
increased by 7.4 % in 2008 to 845 Mt. The first three quarters were characterized by very
strong growth, which turned into a precipitous decline in the final three months of the year, as
steel producers slashed production and raw material purchases. Freight rates peaked at a
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record level in May 2008, following which they declined. The decline, which was initially
due to significant numbers of new ships being delivered, was slow at first and steepened when
freight demand collapsed in the autumn of 2008 as a result of the financial crisis, which led to
a freeze in trade finance. In late 2008, freight rates had fallen to a low not experienced since
the early 2000s. The international freight market will remain depressed this year and maybe
for several years to come.

In 2008, production of pellets reached 317 Mt, 3 % less than in 2007. This reflects the fact
that pellet production was hit harder than other iron ore production in the end of 2008 when
the financial crisis hit.

The 2009 price negotiations have been very drawn out and at the time of writing in mid-June
they are still not concluded. While the “Big 3” producers, Vale, Rio Tinto and BHP Billiton,
have all reached agreements with some of their customers, no deals have yet been made with
Chinese steel companies.

The Japanese steel industry continued to be first to sign when Nippon Steel concluded the
first agreement with Rio Tinto on 26 May. The partied agreed on a decrease in the price of
fines with 33 % and the price of lump ore with 44 %. The agreement was accepted as a
benchmark price by BHP Billiton which signed its first agreement, with Japanese JFE, on 12
June. Meanwhile, Vale had settled for a 28.2 % reduction in the price of fines and a cut of
44.47 % in the price of lump ore. The smaller reduction for Brazilian ore reflects the
elimination of the Australian “freight premium” that was obtained in 2008, and which had lost
its justification with the fall in freight rates. The final outcome of negotiations for prices to
China is still uncertain. It is possible that there will be no agreement at all – which would not
be totally controversial as a large portion of Chinese imports is already traded on a spot basis
– but it may be more likely that agreement will be reached at the rates already negotiated with
the producers by other Asian steel makers.

As a result of the onset of recession, spot prices in China for imported ore fell from a monthly
average of 1570 RMB/t in July for 63.5 % Indian fine ore at Tianjin port to 590 RMB/t in
October.

The benchmark pricing system is under fierce discussion and its future is uncertain, to say the
least. A new price setting mechanism will however not be introduced overnight. Instead, it
will take several years to find a new model and probably there will be several models in use in
parallel.

The market share of the "Big Three" decreased to 34 % in 2008. They have not managed to
increase their production quite as fast as total world production, mainly because of a fast
expansion by small producers in India and China in 2005-2007 and in late 2008 also because
of cuts in production. The level of concentration has thus been more or less constant during
the last couple of years.

To measure corporate control at the production stage underestimates the concentration of the
iron ore sector since large parts of total production do not enter the market due to vertical
integration. An alternative is to look at the share of the seaborne trade. Measured this way, the
shares of the major companies are considerably higher. Vale alone controls 33 % of the total
world market for seaborne iron ore and the three largest companies control 69 %. This
number is quoted by those who argue that the concentration risks leading to control by major
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producers over prices, particularly under the present benchmark negotiating system. While the
proposed merger between BHP Billiton and Rio Tinto failed, it was announced in early June
2009 that Rio Tinto and BHP Billiton had entered into a non-binding joint venture (JV)
agreement covering the entirety of both companies iron ore operations and infrastructure in
Western Australia. This agreement has also raised concern in some quarters about the
growing bargaining power of the large producers. The trend on the part of steel producers
towards creating a network of captive mines, both iron ore and coal, which started in the CIS,
has strengthened. The largest steel producer, Arcelor Mittal, has built a strong holding in the
iron ore sector and more steel works will certainly follow suit.

New iron ore mining capacity taken into operation in 2008 was reported to be about 88 Mt
globally, a lower figure than in 2007. The total project pipeline contains more than 430 Mt of
new production capacity to come on stream between 2009 and 2011. Of this total, around 172
Mt falls into the category “certain”, 54 Mt “probable” and 204 Mt “possible”. About 73 % of
the projects labelled as certain are in Australia. South America has 6.9 % of the certain
projects and Africa accounts for 7.5 % of the certain projects. While West Africa is making a
reappearance as a potential iron ore producer the only project labelled certain in that region is
in South Africa.

The World Steel Association forecasts a fall in steel use by almost 15 % in 2009. It can be
characterized as relatively cautious, since there are signs that the impact of China’s very large
stimulus package may be sufficient to yield positive growth in steel use in that important
country. Similarly, the composition of macro-economic stimuli in other countries, with an
emphasis on construction and support to the transportation industry, is such that the measures
are likely to have a positive effect on steel demand. When analysing probable developments
over the medium term, this report has usually utilized a type of gap forecast, comparing
projected capacity, based on investment plans, with assumptions about steel production. This
approach is less useful in the present situation. The world iron ore industry is operating far
below capacity. Even under the most optimistic assumptions about steel production, demand
for iron ore will surely be lower in 2009 than in 2008. It is clear that the present oversupply
situation will not go away soon. There are, however, two important factors that affect the
outlook, although they do not eliminate the supply overhang. The two factors are expected
low freight rates and high costs in Chinese iron ore mines.

The small and medium size Chinese producers will most likely be forced to substantially
reduce their output, particularly since they are no longer protected by high freight costs for
imported iron ore. It is estimated that half the Chinese iron ore mining industry is at present
operating at a loss.

In the medium term, it is likely that contract prices will stay at a level corresponding to that of
current spot prices, that is, US$ 70/ton of landed ore in China. A consequence of this price
shift will be a shakeout of Chinese iron ore mining. The effect of the price fall will be
reinforced, as far as the Chinese mines are concerned, by rising costs for health and safety
measures, environmental management and rising energy prices. As domestic production in
China falls, the potential slack will be taken up by new investment, particularly by “the big
3”. This will allow the industry in the rest of the world to maintain operating rates that
generate a contribution to fixed costs, although they will not produce at full capacity.
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I. THE IRON ORE MARKET IN 2008

IRON ORE PRODUCTION, EXPORTS AND IMPORTS

Production

World production of iron ore grew by 3.6 % in 2008 to reach more than 1.7 billion tons. This
was a seventh consecutive all time high. Output decreased in most countries but the fall was
more than offset by increases in the major producing countries, including Brazil, Australia,
South Africa and India (see figure 1 and annex table A1). Developing countries accounted for
a little more than 62 % of world iron ore production in 2008 (almost exactly the same as in
2007), the CIS republics for 11 % and the industrialised economies for 27 %. The share of the
CIS republics declined slightly from 12 % in 2007. The increase for the industrialised
economies was due mainly to growth in Australia. China produced 366 Mt (on a comparable
grade basis), or 21 % of total world production in 2008, down from 22 % in 2007. This makes
China the largest producer in the world, more than 15 Mt ahead of Australia.

Since 1999, total growth of the iron ore market has been 95 % or 840 Mt. More than 78 % of
this growth occurred in the last five years and 61 Mt in 2008. In developed market economies
(including Eastern Europe), except Australia and Sweden, iron ore production fell by 6.6 %
during the same period. Australian and Swedish production grew, however, by respectively
130 % and 26 %. In the CIS republics, iron ore production in the same period increased by 37
%. However, production in these countries still has to reach the record levels of 250 Mt that
were attained in the mid-1980s, despite some recovery in recent years. In Western Europe
production seems to have bottomed out and production has been a little shy of 30 Mt for the
past couple of years; Swedish production decreased by 3.5 % in 2008, while in other
 8

producing countries such as Austria and Bosnia-Herzegovina production was stable. Thus the
European share of world production is falling. In North America, production is stable at 85 –
90 Mt. The United States actually saw a slight increase in production in 2008 but Canadian
operations slowed down. Iron ore production in China was roughly stable in 2008 and reached
366.0 Mt.

Among the larger producers, Australia had the fastest growing iron ore industry in 2008 with
a growth rate of 17 %. India’s growth rate was 3.4 % and Brazil’s iron ore production
increased by 2.8 %. In the CIS, Kazakhstan's production decreased by 4.6 %, Russia's by 4.9
% and Ukraine saw a downturn of 7.4 %. Production for 2008 in Africa increased by 11 %,
mainly because of an increase in South African production of 18 %. The two most important
producing countries in Africa, South Africa and Mauritania, accounted for roughly 94 % of
the continent’s production.

Iron ore trade

International iron ore trade also reached a new record level in 2008 as exports increased for
the seventh year in a row and reached 881.8 Mt, up 7.8 %. These figures include all export
trade including intra-CIS trade.

The major developments in iron ore exports and imports for the year 2008 by area are shown
in figures 2 and 3 and in annex tables A2 and A3.

Total iron ore exports have increased by approximately 98 % since 1999. Exports by
developed market economy countries excluding Australia have increased by 20 %, while
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exports of Australia have increased by 110 %. Exports of the CIS republics (including intra-
CIS trade) rose by 101 % between 1999 and 2008.

Developing countries accounted for 51 % of total iron ore exports in 2008, and their exports
have grown by 110 % since 1999. Developed market economy countries accounted for 42 %.
Of world exports and the CIS republics for the remaining 7 %.

Brazil’s exports increased by 4.5 % to 282 Mt in 2008. The increase was smaller than last
year and pushed Brazil back again to second place among iron ore exporting countries, after it
had advanced to first place in 2007. With over 300 Mt and an increase on 2007 of 16 %,
Australia is now again exporting more iron ore than Brazil. Indian exports grew for the ninth
consecutive year and the country is now, at 101.4 Mt, the third most important exporter.
South Africa, Canada, Russia, Ukraine and Iran follow, each with exports at 25-35 Mt.
Swedish exports reached 18 Mt, a decrease from 2007. In Africa, Mauritanian exports
decreased by 7.2 % in 2008, while South African exports rose by 8 %.

For Kazakhstan and Russia, the last couple of years proved successful with regard to iron ore
exports, but in 2008 exports from both countries decreased. Exports from Ukraine, on the
other hand, increased by 5.4 % to 22 Mt. Exports to China increased for all three countries.
These exports began in 2004 and have increased every year since. In 2008, total exports from
the three countries to China increased by approximately 30 % to reach some 14 Mt. Russian
exports to China were more or less stable, while Kazakh exports increased by 20 % and
Ukrainian exports almost doubled. Transport capacity is a limiting factor for expansion.

In 2003 China passed Japan as the world’s largest iron ore importer. In 2008, its imports were
444 Mt, an increase by 16 % compared to 2007. Japan’s imports increased by a comparatively
modest 1.1 % to 140 Mt. Together with the third and fourth largest importer, Germany and
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the Republic of Korea, these countries accounted for around 75 % (678 Mt) of total world
imports. In 2007 the figures were 74 % and 614 Mt. European imports (excluding the CIS
countries), which fell by 5.0 % in 2008, reached 164 Mt, corresponding to 18 % of world
imports. In Europe, Germany is still by far the largest importer at 44 Mt, a 4.1 % decrease
from 2007. France imports a little less than half as much, and the only remaining countries
with imports exceeding 10 Mt are Italy, the United Kingdom, Belgium/ Luxembourg and the
Netherlands. Canadian imports rose by 28 % to 9 Mt while United States imports remained
the same as last year, also at 9 Mt. As a group, developing countries accounted for 55 % of
total iron ore imports in 2008. Due to the strong growth in Chinese imports, the developing
world’s share of total imports increased from only 31 % in 2002 to 46 % in 2005, 50 % in
2006 and 53 % in 2007. The CIS republics do not yet import iron ore from outside the CIS,
and their internal trade was about 1.7 % of the world total. Given Russian overseas projects
imports from the rest of the world will soon be a fact. Developed market economy countries
account for about 43 % of world imports.

The structure of iron ore imports has changed considerably since 1990. Then, Europe was the
dominating import region, with 47 % of total imports (including Eastern Europe). Japan
followed at 31 %, North America accounted for 6 % and China for only 3.5 %. In 2008
European imports corresponded to only 20 % of world imports. Most of the decline is due to
the fall in East European imports, but in recent years the situation seems to have stabilized
and the tremendous growth of the Chinese industry is now a main reason for Europe’s falling
importance as importer of iron ore. If trade among CIS states is not included the figure is even
lower, at 18 %. Japan's share of world imports is now down to 15 %. The importance of North
American imports has also decreased and their part of world trade is now 2.0 %. On the other
hand, the growth of Chinese iron ore imports have been staggering. In 2008 China alone
accounted for 49 % of world iron ore imports.

Developments in early 2009

From developments in the first few months of 2009 it is clear that this year will see a decrease
of iron ore production compared to 2008, although Chinese demand has been unexpectedly
dynamic.

With demand in developed countries falling, China, which has been the main engine behind
the output growth during the past years, will see its share of world iron ore demand rising.
Chinese crude steel production during the first three months of 2009 was 126.7 Mt, compared
to 125.7 Mt for the same period in 2008, an increase by 0.8 %. Imports of iron ore in the first
quarter were up by 19 % to reach 131.5 Mt compared to 110.7 Mt in 2008 (see table 1).

Table 1. China monthly imports of iron ore (Mt)

Change
2000 2008 2009 09/08 %
Jan 5.8 36.8 32.7 -11
Feb 4.9 38.2 46.7 22
Mar 6.3 35.7 52.1 46

Source: China Iron and Steel Association (CISA)

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According to CISA and Baosteel Group, China produced some 500 Mt steel out of a total
capacity of 650 Mt. This indicates the magnitude of the problem of excess capacity. The
Government of China is also reported to have ordered commercial banks to cut or even halt
loans to steelmakers with low efficiency. Whether this will help or not is hard to say. High
cost producers are suffering at the present but small mills capable of quick changes have a
certain advantage compared to their larger competitors.

The crude steel production forecast for 2008, based on official production plans according to
CISA is between 460 - 500 Mt. That would be a change of about -8 % to 0 %. If the amount
produced during the first three months is multiplied by four we get an estimated production of
507 Mt. These figures suggest that the official forecast may be overly cautious and that iron
ore demand for China in 2009 could be more or less the same as in 2008. Considering that a
lot of the Chinese iron ore mines operate close to the margin, some mines will have to close
now that prices of imported iron ore are falling and domestic demand contracts. Imports of
iron ore into China are likely to increase slightly in 2009

Japanese iron ore imports in the first three months of 2009 were 22.6 Mt, compared to 34.6
Mt one year earlier.

Brazilian exports were 51.6 Mt for the first quarter of 2009, 20 % down from 2008. Vale's
(CVRD's) shipments for the first quarter of 2009 amounted to 52.1 Mt, down 5.1 % compared
to the fourth quarter 2008 and 32 % lower than the same period last year.

Exports of iron ore from the Australian ports of Esperance, Yampi Sound, Geraldton,
Walcott, Latta, Whyalla, Hedland, Dampier and Darwin were 50.1 Mt during the months of
January and February 2009, up 4.8 % compared to 47.8 Mt in 2008. BHP Billiton reduced its
iron ore production in the first quarter of 2009 to 28.2 Mt, less 1 % compared to the same
period in 2008 and 4 % compared to the fourth quarter of 2008. Rio Tinto’s share of iron ore
production from the mines it manages was 31.6 Mt in the first quarter 2009, unchanged from
the last quarter of 2008, but down by 15 % from the same period last year. Fortescue Metals
Group Ltd (FMG) produced 6.5 Mt of iron ore, a decrease of 23 %, compared to the fourth
quarter of 2008, while shipments were 6.2 Mt, down 1.8 %. FMG loaded its first vessel with
iron ore bound for China in May 2008.

Canada reported exports of 3.2 Mt of iron ore during the months of January and February
2009, a decrease of 10 % compared to the same months in 2008. In the United States
production was 5.9 Mt in the first quarter of 2009, a decrease of 30 % compared to 2008.
Cleveland-Cliff produced 4.0 Mt of these, a decrease of 25 %. The company is presently
operating at 50 % capacity at its mines in North America. In the CIS states, SeverStal
produced 3.8 Mt of crude steel during the first quarter, down 21 % compared to the same
period last year, and roughly 0.6 Mt of iron ore for sale to third parties, down by 62 %. Total
production of iron ore for Severstal in the first quarter was 2.6 Mt, down 32 % from 2008.
Ferrexpo produced 8.6 Mt of iron ore during January to April, down 9.5 % from last year and
the company’s pellet production was 2.6 Mt, down 14 % compared to the same period last
year. Kumba Iron Ore in South Africa experienced a fall in production by 3.4 % in the first
quarter compared to the last quarter of 2008, but 14 % growth compared to the same period
last year. The increase was reported to be due to increased exports to China.

Sweden’s state owned mining company LKAB also experienced slower sales in the first
quarter of 2009. Production reached 3.7 Mt, down 33 %. Deliveries were 2.9 Mt, down 46 %,
 12

and stocks rose by 100 % to 3.2 Mt. In early June, however, LKAB announced that a planned
12 week maintenance stop will be reduced to 8 weeks as a result of new orders from China.

PELLETS

In 2008, production of pellets reached 317 Mt. This was somewhat lower than the 2007
record of 326 Mt. In per cent the change was a decrease of 3.0 %. This reflects the fact that
pellet production was hit harder than other iron ore production in the end of 2008 when the
financial crisis hit. World exports were 137 Mt, a decrease of 2.9 % compared to 2007. Figure
4 and annex table A4 show developments in world pellets production over the last ten and
five years respectively.

The share of pellets in total iron ore production in 2007 was 20 %, but in 2008 the share fell
to 18 %. The share was 26.8 % in 1997 and has decreased steadily since then. A major factor
behind this slow decrease in the share of pellets in world production has been the decline in
United States iron ore output (pellets account for a large share of blast furnace feed in the
United States). This trend seems to have halted in recent years, however, and there are some
signs that pellets production in the United States has leveled out. Worldwide, several new
pellet plants are being planned or are under construction. Quite a few of them have however
been idle since the global financial crisis hit.

The share of pellets in total iron ore exports has declined steadily since the peak of 2000,
when it reached 21.3 %. In 2008 the figure was 15 %, slightly down from 2007. The share in
2009 is bound to go down further as steel makers trying to reduce production capacity without
having to close down blast furnaces resort to using less productive feed such as sinter fines
instead of pellets.
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The leading role of the United States in pellets production has been challenged by Brazil
during the last couple of years. However, Brazilian production decreased by 7.7 % in 2008,
while in the United States it increased by 1.0 %. There is still considerable uncertainty about
Chinese pellets production, but it is believed to have grown swiftly over the last couple of
years, to reach an estimated 40 Mt in 2008. In 2007, according to the TEX report, new
capacity of around 5.2 Mt were being planned or constructed at Zhuhai Gandong and Ying
Kou. Those pellet plants would be ready sometime during 2008. It is however difficult to say
when they will actually enter production. Swedish LKAB is another important producer that
is switching wholly to pellets. It produced 19.9 Mt in 2008. Pellet production in the CIS states
decreased by 6.3 % in 2008 to 63.4 Mt. Chile, Venezuela and Peru all experienced falls in
their pellet production.

Brazil is still the undisputed export leader with exports of 47.6 Mt in 2008, down 10 % from
2007. Its share of total pellets exports decreased slightly in 2008 and is now 35 %. Canada,
the second biggest exporter with exports of 20.6 Mt in 2008, is still far behind Brazil.

Pellets production, which had been fluctuating between 240 Mt and 230 Mt during the years
directly prior to 2001, has been expanding since. But in the end of 2008 came a slowdown
when steel production dropped. The pellet plants were first to close when capacity was shut
down late last year. In October of 2008 Cliffs Natural Resources stated that it would idle three
pellet plants. LKAB put one of its pellet plants on hold for four months beginning 1
December. Brazilian producers also reduced pellets production; with Samarco closing two of
its three plants and Vale stopping production in four plants by December 2008. In March
2009, Iron Ore Company of Canada gave up its plans to restart the Sept-Îles pellets plant.

This being said, many pellets plants are nevertheless being planned for future iron ore mining
projects. When the quality of the iron ore declines, pellets can be the solution to how to make
a profit from a potential project. Total pellets capacity is stable at around 350 - 360 Mt. But
according to the TEX report, as much as 40 Mt of new capacity was being planned for 2008
and taking into account all the pellets plants being considered, capacity could increase by
some 100 Mt during the years to come. The main reasons for using pellets are:

• When steel demand increases steel producers try to increase blast furnace capacity by
using raw materials with higher iron content.
• Increasing DRI production, favoured by high scrap prices, and which increasingly
tends to be based on pellets.
• Tougher environmental demands on sinter plants, which make pellets use more
competitive.

The high investment costs of new pellets capacity is one of the key arguments against them.
At present, the main problem facing pellets producers is of course the financial crisis, which
does not favour an increase of blast furnace capacity because of lack of demand for steel
products. The fact that most iron ore pellets are consumed in developed countries, which have
been hit worse by the crisis, means tough years are coming for producers of pellets.

New pellet plants under consideration include capacity additions of 33.6 Mt from CVRD,
Samarco, MBR, MMX and Mhag Servicos e Mineracão SA in Brazil. In Mauritania, Sphere
Investment and SNIM are at the feasibility stage with their joint 7 Mt plant. Some of the other
projects are Minnesota Steel's 4.1 Mt plant in the Mesabi Range, New Millennium Capital in
Canada (15 Mt), Sohar Industrial Port Company in Oman (7 Mt), Grange Resources in
 14

Malaysia (7 Mt), Krakatau Steel in Indonesia (1 Mt) and Ferrexpo Poltava Mining in Ukraine
(8Mt). There are also plans to increase pellets capacity in India and Iran and London Mining
is pushing ahead with its 5 Mt pellets project in Saudi Arabia.
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SEABORNE IRON ORE TRADE

Seaborne iron ore trade is estimated to have increased by 7.4 % in 2008 to 845 Mt. The first
three quarters were characterized by very strong growth, which turned into a precipitous
decline in the final three months of the year, as steel producers slashed production and raw
material purchases. During 2009, the impact of the world wide recession will maintain
seaborne trade at a level more or less corresponding to that of 2007, that is, around 780 Mt.
As will be seen later, we expect iron ore production to fall by more than this figure, since
production cuts in mines that do not export their products overseas are likely to be more
severe than in the large export mines. Figure 5 shows the development of seaborne trade over
the past several years.

Figure 5. Seaborne trade in iron ore, 2000-2009, Mt, (projected 2009)

Source: Clarkson, Dry Bulk Trade Outlook, May 2009

Total dry bulk trade grew by an average of more than 6 per cent per from 2003 to 2008.
Freight demand increased at an even faster rate, since reorientation of trade, for instance, the
growing importance of Brazilian iron ore exports to China, resulted in longer journeys and
therefore a larger quantity of total transport work measured in tonne miles. Accordingly, since
the dry bulk fleet also grew at just over 6 per cent per year during the same period, the reserve
capacity was gradually eliminated. Moreover, the increase in trade was not evenly distributed
across the world, and some ports, for instance, Australian coal export ports, Brazilian ports
handling exports of iron ore and import ports along the Chinese coast, experienced a much
faster growth in activity than others. The result was congestion of ports and sometimes long
waiting periods for ships to be unloaded and loaded. The port congestion reduced effective
freight capacity dramatically and led to sharp increases in freight rates.

These developments explain the rapid rise in freight rates shown in figure 6. After having
risen steadily in 2006, freight rates increased even faster in 2007. They reached a temporary
peak at the end of the year, following which they declined. The reason was that new freight
orders disappeared, simply because no ships were available, due to a large number of them
being held up in Brazilian ports. Freight rates then resumed their rise through the first five
months of 2008 and peaked at a record level in May, following which they declined. The
decline, which was initially due to significant numbers of new ships being delivered, was
 16

slow at first and steepened when freight demand collapsed in the autumn of 2008 as a result
of the financial crisis, which led to a freeze in trade finance. In late 2008, freight rates had
fallen to a low not experienced since the early 2000s. Freight rates recovered somewhat in the
early months of 2009, since the very low rates did not cover operating costs for ships, given
that oil prices remained at historically high levels.

Figure 6. Average freight rates for Capesize ships (over 80,000 dwt), 2001- April 2009 (USD/t)

Source: SSY.

The international freight market will remain depressed this year and maybe for several years
to come. The order book (the number of ships on order and being built) corresponded to 28 %
of the dry bulk fleet at the end of 2006. It grew to 63 % at the end of 2007, and to 73 % at the
end of 2008, as shipping companies, anxious to keep their market shares in what they saw as
an endlessly expanding market, continued placing new orders. With freight demand falling,
orders are now being cancelled. However, since payments up front are high in the
shipbuilding industry, cancellations carry a heavy cost, and mainly concern ships that were
going to be delivered in a few years rather than soon. Moreover, although the number of
demolitions has increased, it is less interesting to break up ships in a situation where scrap
prices have fallen to historical lows. Accordingly, even under “optimistic” assumptions
concerning cancellations, the world dry bulk fleet would grow by 10 % in both 2009 and
2010.

While the supply of shipping capacity is rising, demand is expected to fall. The recession has
particularly severe effects on sectors such as construction, which is strongly dependent on the
materials that make up most of the world’s bulk trade, such as steel and steel making raw
materials. Most commentators expect a fall in dry bulk trade by 2 to 5 % in 2009 and a small
upturn in 2010. This means that the surplus of shipping capacity will continue growing and
that it will overhang the freight market for several years to come. This development has
 17

important implications for the world iron ore market since freight rates has been one of the
most decisive influences on the market in recent years – an influence that now appears likely
to decline.

In early June 2009, freight rates increased unexpectedly. This increase was the result of
several factors:

• Severe congestion in Chinese ports, particularly those where iron ore is unloaded, due
to a surge in imports
• A shift in Brazilian iron ore exports from Europe to China, resulting in longer
journeys
• Lower than expected deliveries of new ships in the first months of the year (only 13 %
of the Capesize ships scheduled for delivery in 2009 were actually delivered in the
first four months of the year)
• A switch on the part of many freighters to spot chartering

It is expected that freight rates will return to lower levels as the weight of new deliveries starts
impacting on the shipping market.

IRON ORE PRICES

At the time of writing, the 2009 benchmark iron ore price negotiations had not yet been
completed despite a first deal being struck by Rio Tinto and a second by Vale two weeks
later. This year's round of negotiations have been tougher than in many years. It is likely that
a final agreement with the most important group of buyers, the Chinese steelworks, will only
be reached by the end of June. The Chinese steel mills are led by Baosteel and backed by
CISA, which represents more than 100 steelworks. Voices are still heard demanding a sharp
decrease in prices to offset the lower profits for the steel companies. Some buyers demand
that iron ore prices to be cut at least to 2007 levels. Initially some expected that price
reductions would be as large as 50-60 per cent, but when Chinese spot prices later increased,
expectations were moderated.

Rio Tinto announced on 26 May that it had reached the first agreement in the 2009
benchmark negotiations with Nippon Steel Corporation, the largest steelmaker in Japan. For
the first time in many years it was not Vale that set the first benchmark and it was not made
with a Chinese steel company. The outcome of these negotiations was a decrease in price for
Pilbara and Yandicoogina fines with 33 % to 97 USc/dmtu and by 44 % to 112 USc/dmtu for
Pilbara lump. A few days later Rio Tinto announced that the same terms had been agreed with
Korean Posco and the steelmakers CSC and Dragon in Taiwan Province of China. It is
significant that the Japanese and the Koreans are first to conclude agreements this year as the
steel companies of both countries have been the most vocal supporters of the benchmark price
model. Steel companies have been reported to say that they do not want to come into a
situation where they are at the mercy of speculators. They maintain that the long term
investments necessary for both iron ore miners and steel companies demand either a long term
price setting mechanism or a larger share of captive production. The Japanese and the Korean
steel mills also depend less on low iron ore costs as they produce higher quality steel than
their Chinese competitors.
 18

The second agreement in 2009 was concluded by Vale on 10 June, also with the Japanese
Nippon Steel and Korean Posco. Other Japanese steelmakers such as Sumitomo Metal
Industries, Kobe Steel and Nisshin Steel followed suit immediately. Southeastern fines prices
declined by 28.2 % to 85.43 USc/dmtu and to 89.87 USc/dmtu for Carajas fines. Lump prices
went down by 44.47 % to 99.42 USc/dmtu. With this slightly smaller price reduction for
Brazilian deliveries, the freight premium achieved by Australian producers in 2008
differential is almost gone. Vale also concluded the first pellet deal at 110.43 USc/dmtu, a
decline by 48.3 %.

Finally, on 12 June BHP Billiton agreed on prices with the Japanese steel company JFE Steel.
The Mt Newman lump price was set at at US¢112.00/dmtu and Mt Newman fines price at
US¢97.00/dmtu, down 44.47% and 32.95% from the previous year, respectively. Thus, all three
large producers have concluded agreements with some of their customers, in the case of the
two Australian producers with exactly the same price reductions.

This was the first year with a decline following six consecutive years of increasing prices and
cumulative price increases by more than 400 %, for instance for Hamersley lump to Asia.
Even after the 2009 reduction, prices are at historically high levels and slightly higher than in
2007 for both lump and fines. From 2002 fines prices from Australia to Japan have increased
by 343 % and lump by 310 %.

Vale’s earlier dominance as price setter has been broken. The Brazilian company announced
at an early stage that it would not be the first to conclude a deal this year. Vale is trying to
avoid last year's failure when it achieved a lower price increase than the Australians who
settled later. The relative absence of the Chinese steel mills is also striking. They gradually
managed to act in a more coordinated fashion in negotiations until they were part of the first
settlement with Vale in 2007. In 2008, however, Vale made the first deal with a European
buyer and the Chinese were not playing the key role.

As in 2008, all market participants have not agreed to the new prices. Chinese steel mills have
not yet made any agreements. Normally, most contracts are settled within a few weeks after
the initial agreement. In 2008 the Australian producers did not accept the benchmark price set
by Vale. Instead, they demanded a "freight premium" because of the lower cost of shipping
ore from Australia to Asia. The CISA stated that “Australian miners are asking for a freight
rate premium, and Chinese mills are not willing to accept this”. From Rio Tinto came the
comment that “All that we’re seeking is a fair return for the savings on freight, the natural
premium of geographical proximity.” In the end the Chinese had to give in and on 24 June
Rio Tinto announced that it had come to an agreement with Baosteel. The new iron ore price
was settled with a 79.88 % increase for Hamersley fines and 96.50 % increase for Hamersley
lump ore. Shortly afterwards, the Japanese steel companies accepted the price increases. And
on 4 July BHP Billiton announced that it had come to an agreement with the Chinese on the
same conditions. By 7 July the Japanese steel companies also accepted BHP Billiton’s prices.
On 7 November five Japanese steel mills agreed on iron ore prices for the fiscal year of 2008
with Indian entity MMTC in representation of Indian iron ore suppliers and with that the 2008
iron ore negotiations were concluded.

On 9 September 2008 Vale announced that it had approached its Asian customers to call for
an increase of prices of between 11.0 – 11.5 %. Vale claimed that the intention was to
harmonise the prices paid by European and Asian customers. At present the steel mills in
 19

Europe pay more for their iron ore than their Asian competitors. Chinese steel mills however
refused and when spot prices started to decline Vale dropped its claim for higher prices.

As a result of the onset of recession, spot prices in China for imported ore fell from a monthly
average of 1570 RMB/t in July for 63.5 % Indian fine ore at Tianjin port to 590 RMB/t in
October. Prices increased slightly during the next couple of months but never went higher
than 655 RMB/t and in April 2009 they were down to 540 RMB/t (see figure 7).

When the iron ore spot price plunged in the wake of the global financial crisis there was no
doubt that benchmark prices would also be cut.

The benchmark pricing system is under fierce discussion and its future is uncertain, to say the
least. It seems likely that it will be modified in various ways and there are many indications
that this is happening:

• The Australians succeeded in getting a freight premium in the 2008 negotiations.

• Vale asked for a price adjustment in September 2008 to level out the European and the
Asian iron ore prices.
• Vale refused the price setting role in 2009 although it has been the strongest proponent
of negotiated prices.
• The drawn out negotiations in themselves are putting pressure on the system. In 2009
the sellers were hoping that the market situation in the steel sector would improve
before negations were completed.
• Some steel companies have cancelled their long term contracts and started to buy in
the spot market - at least as long as these prices are lower than the contract prices.
• The volumes traded on the spot market have steadily grown and in 2008 all the three
large producers sold increasing volumes on the spot market. But the spot market still
does not account for more than 20-25 per cent of the total and in the present downturn
the share might decline.
 20

• Beginning in the first half of 2008 several new pricing mechanisms and price risk
management instruments have been introduced that makes spot trading easier and less
risky: the Metal Bulletin and Platts iron ore indexes; iron ore swaps offered by several
banks, including Deutsche Bank and Credit Suisse; the Singapore Exchange has
cleared OTC iron ore swap contracts.

A new price setting mechanism will however not be introduced overnight. Instead, it will take
several years to find a new model and probably there will be several models in use in parallel.
It is not likely either that the benchmark negotiations will disappear completely. In 2009 and
2010 hybrid models will be used combining elements from both a benchmark model and a
spot model. When price negotiations for 2009 started, the Chinese demanded that the price
should be effective from the first of January and that prices should be settled twice or four
times a year instead of only once. In order to have a system similar to the model used for
copper trading based on the LME prices a lot more liquidity and transparency than today will
also be necessary. Another alternative that is not yet ready for full scale application is to use a
widely traded steel quality as the basis. Steel trading on the LME, which was recently
introduced, has however not developed as quickly as hoped for.

On the producing side, BHP Billiton has been proposing a new system since 2006. It argues
that an index based system or spot prices would allow consumers to hedge the risk of market
fluctuations and lock in prices. This is not possible with the present system. In earlier years
Rio Tinto was leaning towards the same opinion as BHP Billiton but this year's initial
benchmark prices indicate that it may have modified its position slightly towards a dual
system. Vale has been the fiercest proponent of the bench mark system but with its recent
refusal to take the lead it seems as if it is also changing its opinion.

When considering the future of iron ore pricing it is however also important to understand
that most iron ore is sold on long term contracts and that buying iron ore is not like buying
other metals. One of the most important considerations for steel mills is the consistency of
quality of the iron ore. The operator of a blast furnace wants to be absolutely able to trust that
the iron ore to be delivered will be of the same quality as that in the last batch. This means
that the system favours long term contracts from steady suppliers. But the price needs to
reflect the changing market conditions. When the market declined rapidly in late 2008 and
benchmark prices stayed the same most steel producers were locked in long term contracts
that exposed them to losses once the bottom fell out of the market for steel products.

The final outcome of negotiations for prices to China is still uncertain. The process has
dragged on for longer than in any of the last ten years. The early settlement by the Japanese
and the Koreans with Rio Tinto makes it less likely that the Chinese will manage to get a
larger reduction than the Japanese. More likely is either no agreement at all – which would
not be totally controversial as a large portion of Chinese imports is already traded on a spot
basis - or to settle at the rates already negotiated with the producers by other Asian steel
makers. Clauses providing for regular price adjustments could also be introduced to
accommodate the interests of BHP Billiton and Chinese steel mills.

Whatever the outcome, the future of the benchmark negotiating system looks bleak. The
power of the major iron ore producers is unchanged and the Chinese will continue to opt for
more captive iron ore supply.
 21

II. STEEL IN 2008

CRUDE STEEL PRODUCTION

World crude steel production decreased from 1345.4 Mt in 2007 to 1324.7 Mt in 2008, a
change of -1.5 % (see figure 8 and annex table A13).

Source: World Steel Association

Production in China increased by 1.9 per cent. While production was still rising, the rate of
growth was much lower than the 16 % change achieved in 2007. China now accounts for
more than a third of world production (38 %). All regions except Asia experienced falls in
production. In Europe, production fell by 6.4 per cent and Africa experienced a decrease of
8.8 per cent. In the Americas production declined with 4.9 % and in Oceania, production was
reduced by 4.1 %. Asia increased its production with 1.5 % if China is included and 0.8 %
excluding China. Among the larger producers, the United States, Russia and Germany
experienced decreasing production by between 5.4 and 7.0 %, while Japan had a slightly
smaller decrease of 1.2 %. China, India and the Republic of Korea all experienced increases
of between 1.9 and 4.1 per cent.

In the first three months of 2009, crude steel production has levelled out after the fall in 2008
from the record month of May 2008, when 121 Mt was produced, to the low of December
2008 with 82 Mt. Production now seems to have stopped falling and there was even a slight
rise in world production to 92 Mt in March. World output (for World Steel Association
member countries) for the period was 23 per cent lower than in the same period in 2008.
There are exceptions to the falling trend. In China, production of crude steel actually
increased with 1.4 % in the first quarter of 2009 compared to the same period last year.
 22

PIG IRON PRODUCTION

World pig iron production in 2008 was 926.4 Mt. This represented a decrease by 2.1 %
compared to 2007 (946.3 Mt, see annex table A12).

China, which accounted for about 51 % of world production of pig iron in 2008, compared to
about 50 % in 2007, experienced a decrease, from 469 Mt to 468 Mt or by 0.3 %. Production
in the second largest producing country, Japan, also decreased slightly by 0.7 % to 86 Mt.
Production in Russia decreased by 5.5 % to 48 Mt, and in Ukraine it decreased by 13 % to 31
Mt. In the United States, where production fell precipitously in 2005 and where production
subsequently was fairly stable, there was a further decrease of 6.7 % to 34 Mt in 2008. In the
European Union (15), production decreased by 5.3 % from 95 Mt to 90 Mt. Brazil, which
experienced an increase in production in 2007, reduced its production in 2008 by 1.7 % to 35
Mt. India’s production rose by a modest 0.3 % to 29 Mt. In the Republic of Korea, production
rose by 7.2 %, to 31 Mt, and in Taiwan Province of China it decreased by 7.6 %, to 9.7 Mt.

DIRECT REDUCED IRON (DRI) PRODUCTION

In 2008, world production of DRI amounted to 68.5 Mt, an increase of 1.8 % compared to
2007 (see figure 9 and annex table A11). Global DRI capacity increased by 1.6 Mt or some
2.5 %. Growth was mostly due to ramping up of production at plants already started in 2007.
This was the case in for example Saudi Arabia, Russia, Qatar, India, Iran and Malaysia.

2008 turned out to be a turbulent year: it started off with input shortages, for example of iron
oxide pellets in Venezuela, but by the end of 2008 the slowdown resulted in approximately
one third of DRI capacity being idle. One obvious reaction to this was a halt in most
construction of additional plant capacity.

Source: Midrex.
 23

India remains the leading producer and its production is now 21.2 Mt. The increase for 2008
was 11 %, a slower rate than the 29 % achieved the year before. Iran, the second largest
producer, experienced an increase in production of 0.3 %. DRI capacity increased, however,
by 11 %. Production in Venezuela, which used to be the second largest producer, fell again.
Now at 6.9 Mt, the country is number three. The decrease in production was 11 %, marking
the third consecutive year of falling production.

The MIDREX process continues to be the most important for DRI production, accounting for
58 % of the world total, a very slight decrease since last year when it had 59 %.

When the crisis hit there were plans, as well as already started projects, for adding to total
world capacity. Some of the plans will most probably be pushed to the future or put on hold,
but DRI plants are under construction in several countries, including Abu Dhabi, Oman,
Pakistan, Egypt, India and Iran.

In 2008 total world exports of DRI was 14.0 Mt, down by 18 % compared to 2007.

STEEL USE, TRADE AND PRICES

The steel industry is facing its worst demand downturn since the oil crisis of 1974-1975. The
main reason for this is that steel is a key input in the construction, mechanical engineering and
transport vehicle industries, sectors that are among the hardest hit in the current global
economic recession. What began as a gradual slowdown in global steel use growth in the
second half of 2007 in most developed countries became a sharp worldwide contraction in the
autumn of 2008. In the fourth quarter, world apparent steel use was about 20 % lower than in
the final quarter of 2007. As a result of the steep downturn in the final quarter, world use of
finished steel products decreased in 2008 by 1.4 % to 1,197 Mt (see figure 10). Steel use fell
in the developed world, which entered recession earlier, while it continued rising in most
developing countries. In China, steel use increased by 2.9 %, and increases were also recorded
in other Asian countries and in Latin America.

The recession has also led to a very large slowdown in trade. Following a strong performance
in the first nine months of 2009, the volume of world trade in steel (average of exports and
imports) declined by 20 % in the fourth quarter from a year earlier. The reaction of steel trade
in the current cycle has been much stronger than during the past episodes of weak demand.
This is the result of exporters’ reduced access to credit to finance shipments and the intensity
and scope of the current global demand contraction. For example, the market downturn 1990-
1992 was associated with a rapid expansion in trade volumes. During the Asian crisis of
1998-1999, steel trade declined, but at a much slower pace than today.

Although reductions in global supply have prevented steeper steel price declines, the industry
is nevertheless experiencing one of the most substantial price falls ever. After reaching a
historical high in July 2008, the average global price of steel has declined each month. By the
end of 2008, the price was back at pre-boom levels in Europe and North America, more or
less equal to prices in early 2006 8although still more than twice as high as in 2000). Prices in
China have held up much better and appeared to halt their decline in late 2008, illustrating
that steel prices in regional markets can diverge significantly.
 24

Figure 10. Apparent world steel use, Mt

Source: World Steel Association

 25

III. COUNTRY INFORMATION

EUROPE

AUSTRIA

Production of iron ore in Austria was 2.0 Mt in 2008, a decrease of 5.6 % compared to last
year. Imports into Austria also declined, from 9.0 Mt to 8.0 Mt, a change of -11 %. The
Erzberg open pit mine is the only producer. The entire production is delivered to the
Donawitz and Linz steelworks in the Voest-Alpine group. Production was originally planned
to cease in the early 2000s but operations have continuously been upgraded and the
economics of the operation have improved as a result of high iron ore prices.

NORWAY

Norway has only one iron ore producer, Rana Gruber AS. Iron ore is extracted from the
Kvannevann underground mine situated in the ∅rtfjell mining area close to the Storforshei
village. The mine was inaugurated in 1999. In 2008 the company’s production was an
estimated 0.6 Mt, a slight decrease from last year. The production consists of concentrates.
High value pigments account for an economically important part of Rana’s production. All of
the concentrate produced is exported to Germany and the Netherlands. The iron ore at the
Kvannevann underground mine contains an average of 33% iron and around 1.6 million
tonnes of ore is mined annually by underground open stope mining methods. In June 2007 the
board of directors decided to partly change their plans for the mine. The new investment plan
consists of among other things a new sub-level to be opened by 2009. This will extend the
lifetime of the mine considerably. At this new sub-level operations will run until 2025. To
meet the demand for iron ore, Rana Gruber AS has decided to expand its mine and add an
open pit operation to the underground mine. The open pit operation will take ore from mainly
the Eriksbruddet ore body close to the original mine.

In early 2006 the Sydvaranger mine on the border to Russia, which had been in operation
between 1910 and 1997, was bought by a local property developer. The mine was later taken
over by the Norwegian shipping company Tschudi. In December 2007 Northern Iron
Limited, the owner of Sydvaranger, was listed on the Australian stock exchange in the largest
mining IPO of that year. Tschudi kept control and sold out only 49 % of the project and raised
over 140 million Australian Dollars. Production is projected to start in 2009 at 2.9 Mt per year
of magnetite concentrate.

SWEDEN

In 2008 the production of iron ore in Sweden decreased with 3.5 % to 23.8 Mt, of which 19.9
Mt was pellets and the rest was fines. The two largely automated underground mines (Kiruna
and Malmberget) run by LKAB, the 100 % state controlled sole Swedish producer of iron
ore, together produced some 43 Mt run of mine ore. During 2008 production of fines from the
Kiruna mine stopped. Fines will in the future only be available from Malmberget and Kiruna
will be a 100 % pellets mine. Exports also declined during 2008 to 17.8 Mt, down 8.2 % from
last year’s record of 19.4 Mt. Exports now account for 75 % of total production, slightly down
 26

from 79 % in 2007. Pellets production accounted for 84 % of the total volume, an increase
from 76 % in 2007. Pellets exports increased by 3.2 % to 13 Mt. Most deliveries (65 %) are
bound for European markets. Other important markets are North Africa and the Middle East,
including Egypt, Saudi Arabia, Turkey, Qatar, Libya and the United Arab Emirates.

During the last couple of years LKAB has made several major investments with a view to
increasing the company’s production capacity. These strategic investments will take the
company from around 23 Mt, to 30 Mt of iron ore products per year. During May of 2008 the
new pellets plant at the Kiruna mine was finalised and taken into production. This was an
important step towards the company’s plan to become a 100 % pellet producer. During 2008
the decision was taken to establish new sub-levels in the two mines. This represents
investments of totally 17 billion SEK (a little more than 2 billion US dollars), including some
already spent on infrastructure in the mines, and will increase the company’s production
capacity and the life of the mines. The new sub-level at the Malmberget mine is planned to be
taken into use in 2010 and that in the Kiruna mine in 2012. Since 2005 LKAB has undertaken
major upgrading work on its logistics between mines and harbours. This includes funds being
allocated to the train fleet. A uniform fleet of locomotives and ore cars for a minimum 30-
tonne axle load will be introduced. In January 2006, construction of a whole new storage and
discharging structure with underground silos began in the harbor of Narvik. This work is
planned to be finished by the fourth quarter of 2009.

At least four new iron ore projects are being developed in Sweden: two green field projects in
the northern part of the country by foreign controlled junior companies (Northland
Resources with several advanced projects and Beowulf with one early stage project) and a
plan funded by local capital to revive the Dannemora mine 100 km north of Stockholm,
which had been in operation since medieval times but was closed in 1992. In central Sweden
Grängesberg Iron AB is planning to reopen the old Grängesberg iron ore mine that closed
down 1990. A pre-feasibility study is scheduled to be completed by 2010.

OTHER EUROPE

In the rest of Western Europe, large scale iron ore production for the steel industry ceased in
1997. Mining has continued on a small scale but the ore has been used mainly as a coloured
ballast material in the concrete industry, as heavy media in mineral processing and as raw
material in the production of pigments with magnetic properties. Production takes place in
Germany with an output of 0.5 Mt in 2008 at the Wohlverfahrt–Nammen mine and in Spain.

Imports of iron ore into Europe (excluding the CIS countries) decreased by 5 %, from 173 Mt
in 2007 to 164 Mt in 2008. Countries with rising imports include Belgium, Bosnia and
Herzegovina, Czech Republic and Serbia. All other countries in Europe experienced falling
iron ore imports in 2008 compared to 2007. The five most important importing countries in
Europe 2008 are Germany with 44.3 Mt, France with 18.3 Mt, Italy with 16.3 Mt, the United
Kingdom with 15.3 Mt and Belgium with 12.3 Mt.

Eastern Europe still has some small scale production of iron ore for the steel industry. The
most important producing country is Bosnia and Herzegovina, where iron ore output has risen
considerably the last two years. Production in 2008 reached 1.2 Mt compared to 1.3 Mt in
2007 but as much as 3.4 Mt in 2006. Bosnia and Herzegovina exported around 0.7 Mt of iron
ore in 2008.
 27

Mines in the former Yugoslavia include:

• The operations in Prijedor area, mainly Ljubija mine, operated by the former
Rudarsko Metalurski Kombinat Zenica, now ArcelorMittal, in Bosnia and
Herzegovina. Since ArcelorMittal took over in 2004 the mine has been rehabilitated
and annual production is now back at the former level of 1.5 Mt after an expansion
programme was successfully implemented. A new pit, Buvac, is also planned to open
in the same area in 2009.
• The lateritic nickel-iron ores in Kosovo, Magura, Glagovac, Lipjan, Trstenik and
Cikatovo, all open pit mines and all closed since the mid 1990s.
• The Skopje Rudnici i Zeljezarnica in the Former Yugoslav Republic of Macedonia
used to operate some small iron ore mines (Tajmiste, Demir Hisar and Damja) with
a total capacity of not more than 1 Mt. All closed down in the mid 1990s but have now
been re-opened and are reportedly gradually reaching their former production
capacity.

Other producing countries include Slovakia with a preliminary 0.2 Mt in production 2008.
Slovakia, has experienced a steady decline in iron ore production during the last years and in
October of 2008 the mine closed down. A small portion of the production, 0.1 Mt, was
exported to Czech Republic and Serbia. Iron ore was produced in the underground mine at
Nizna Slana, Slovakia’s only iron ore mine. In 2008 it produced 0.2 Mt (preliminary figures)
of pellets. Production has been more or less stable for the last four years after a drop in
production of about 45 % between 2001 and 2002. The mine is fully owned by the private
company Oz Siderit.

In Bulgaria iron ore used to be mined at the open pit Kremikovtsi mine. In 2005, however,
the mine was closed down.

The two remaining Romanian small scale mines, Remin and Deva, continued to produce a
few hundred thousand tonnes until 2007 when they were closed.

CIS REPUBLICS

The CIS (ex-USSR) republics, Russia, Ukraine and Kazakhstan, all reduced their iron ore
production, from a total of 202.1 Mt in 2007 to 190.4 in 2008, a decrease of 5.8 %. Exports,
which totalled 59.6 Mt in 2008, decreased by 4.3 % compared to the 62.2 Mt exported in
2007. In 2008 imports into the CIS republics increased to 15.1 Mt.

By world standards, the iron ore sector in the CIS republics was fragmented earlier.
Beginning in 2004, however, several steps towards consolidation were taken and from 2007
this process could be said to be complete.

The years of high prices and a belief in the strong fundamentals for iron ore mining have
prompted many new ideas for projects in parts of the CIS that were not earlier considered as
potential iron ore districts: Kyrgyzstan, Uzbekistan, arctic Ural, the Siberian Chita and Tomsk
regions. Companies, both domestic and foreign, which earlier were not interested in this metal
have entered the industry: the diamond producer Alrosa, copper producer Urals Mining and
Metallurgical Company (UMMC), Uzbek gold mining giant Navoi, British gold miner Peter
 28

Hambro, German steel and technology group Salzgitter and several private Chinese mining
groups such as the Luneng Group. How many of these that will survive the current financial
climate is hard to say but the developments have shown that the CIS countries have potential.

KAZAKHSTAN

Iron ore output in Kazakhstan fell in 2008. Production reached an estimated 18.8 Mt, down
4.6 % compared to 2007. Total exports from Kazakhstan were estimated at 15.2 Mt, a
decrease of 5.1 %. Kazakhstan’s exports have traditionally been shipped by railway to Russia.
Since 2003, following the announcement that Jiugang Iron & Steel would increase its imports
of Kazakh iron ore up to 3 Mt, China has become more important as a market for Kazakh iron
ore. Kazakhstan is equidistant to China and Europe, and this location could be turned into a
major advantage in the future. Pellets production is important in Kazakhstan and accounted
for some 53 % of total exports and 43 % of the total production in 2008.

The Sokolovsko-Sarbay Mining and Processing Industrial Association (SSGPO) dominates

Kazakh iron ore production. SSGPO is one of the members of the Eurasian Natural
Resources Corp, which brings together some of the country’s biggest producers of
ferroalloys, iron ore, alumina and aluminium and energy. SSGPO is reportedly controlled by
Belarussian Alexander Mashkevich together with local interests. The nature of the
Association and the interaction between its members are difficult to assess for outsiders. The
ambitions to create a larger iron ore unit by teaming up with other Russian and Ukrainian
produces have been widely publicised but it seems that this process has ground to a halt. In
2008 the company produced 15.5 Mt. at the three open pit mines Korzhinkolskoye, Sarbaisky
and Sokolovsky, down from 16.8 Mt in 2007. Early 2009 the company was reluctant to
forecast iron ore sales as SSGPO is working at roughly 60 % of capacity. The second iron ore
producer in the country is Arcelor Mittal which has four iron ore mines in central Kazakhstan:
Lisakovsky Mining and Beneficiation Plant (GOK), Atasuysky GOK, Atansor mine and
Kentobe mine together produced 3.3 Mt in 2008, raising production by 14 % from 2.9 Mt in
2007. All of these operations supply the Arcelor Mittal group’s Temirtau Steelworks
(previously Ispat Karmet) in the Karaganda region of Kazakhstan.

RUSSIA

Iron ore production in Russia fell by 4.9 % in 2008 to 100 Mt, down from 105 Mt in 2007.
Exports were 22.5 Mt, down 12 % from 2007 when exports was 25.5 Mt. The five most
important export markets for Russian iron ore are: China 5.8 Mt, Poland 3.9 Mt, Ukraine 2.4
Mt, Slovakia 2.2 Mt and Czech Republic 2.1 Mt. China has been by far the fastest growing
export market the last couple of years and in 2007 China became the largest single importer of
Russian iron ore. In 2008 it was the only country of the top five importers from Russia with a
growing import, however modest, at 1.0 % compared to 2007. Russia imported 12.1 Mt of
iron ore in 2008, down 11 % from 2007. Almost all of that iron ore came from Kazakhstan.

Russia has three major iron ore mining districts, the Kursk Magnetic Anomaly area (KMA)
on the border with the Ukraine, the north western Kola Peninsula and Karelian area and in the
Ural Mountains. Of these three areas KMA is the most important. Many of the mines are huge
open pit operations, some handling over 100 Mt of rock and ore annually, but the ore grades
are low and in an international comparison of output most mines and mining companies are
 29

relatively small. The six most important mines are in order of production: Lebedinsky GOK,
Michailovsky GOK, Stoilensky GOK, Kachkanarsky GOK, Karelsky Okatysh and
Kovdorsky GOK. These six mines together accounted for more than 75 % of total Russian
production in 2008. Several underground mines in the Ural region produce only 500-600 kt
annually, with production being delivered to nearby steelworks in West Siberia.

Russian steel works control most of the domestic iron ore production. In recent years they
have also begun to look for alternative iron ore sources outside their traditional home turf.
They have interests in India, Pakistan, and Iran, and also in South America, South Africa and
West Africa.

UKRAINE

Ukrainian iron ore production decreased in 2008 by 7.4 % to 71.7 Mt. Exports on the other
hand increased by 5.4 % from 20.7 Mt in 2007 to 21.9 Mt in 2008. The most important
exporting area for Ukrainian iron ore is Eastern Europe, which receives around 65 % of
Ukraine’s exports. The three most important destinations are, in order of importance: the
Czech Republic, Poland and Slovakia. More than 52 % of Ukraine’s exports end up in these
three countries. Ukraine’s imports decreased from 3.6 Mt in 2007 to a preliminary 3.0 Mt in
2008. The pellet proportion of production has stayed almost the same, at between 23 % and
29 %, throughout the last eight years. The pellet proportion of exports rose between 2001 and
2005 but it has decreased since 2006 and is currently at 40 %.

Ukraine has nine major iron ore operations: Inguletsky GOK, the largest, produced 12.6 Mt
in 2008, Severny GOK also produced 12.6 Mt, Novokrivorozhsky GOK with 9.4 Mt,
Yuzhny GOK with an estimated 6.5 Mt, Poltavsky GOK 10.5 Mt, Krivoy Rog an estimated
5.3 Mt, Tsentralny GOK 5.7, Zaporozhye mining complex an estimated 3.3 and Sukhaya
Balka iron ore mine, the smallest, produced 2.7 Mt in 2008. Russian based Evraz completed
the acquisition of Sukhaya Balka in 2007 as part of its taking over the entire Dnepropetrovsk
Iron & Steel Works.

Most of the Ukrainian steel industry was privatised in 2004. Some of the deals were directly
challenged and had to be put out for renewed tender. In 2005 Mittal Steel made a successful
bid in the repeat sale of Kryvorizhstal, which was first taken over in the 2004 initial
privatisation by System Capital Management through its subsidiary Investment Metallurgical
Union. In the 2005 deal Mittal acquired 93 per cent of the integrated steel plant and two iron
ore mines, Novokrivorozhsky GOK and Artem, for a total consideration of 4,790 MUSD.
Kryvorizhstal was renamed ArcelorMittal Kryviy Rih. Under the agreement under which it
was acquired, ArcelorMittal Kryviy Rih is committed to invest 500 MUSD through 2010. By
the end of 2008 some 495 MUSD of this sum had been invested.

AFRICA

MAURITANIA

In Mauritania, Societé National Industrielle et Minière (SNIM) is the sole producer of iron
ore. The 78.4 % state owned company had a production of 11.2 Mt in 2008, a decrease of 0.7
% compared to 2007. Mauritania is now back to the levels reached in the 1990s when
 30

production was 11 Mt and more. All of Mauritania’s production is for export and in 2008,
11.0 Mt were exported, an increase of 7.2 % compared to 2007. The main market for
Mauritania’s iron ore exports is Europe. About 77 % of Mauritania’s iron ore ended up there
in 2008. In 2007 exports to China also took off and in 2008 some 2.5 Mt was exported to the
Chinese market. The five most important destinations, accounting for 88 % of exports, are, in
order of importance, China, France, Germany, Italy and Belgium. SNIM has three operating
mines: M’Haoudat, Guelb El Rhein and Idjill Kedia.

A couple of iron ore projects are under development in Mauritania. The Australian company
Sphere Investments is developing the Guelb el Aouj project in a joint venture with SNIM. The
deposit has resources of over 926 Mt and reserves of some 430 Mt of magnetite iron ore. The
mine has an estimated life span of at least 30 years. Plans have been expanded to include also
a pellets works of 7 Mt/year and development of two other deposits nearby.

In 2007 Qatar Steel agreed to take a 49.9 per cent interest in the project. After being unable to
execute formal agreements, however, SNIM and Sphere cancelled the deal and are currently
50 % project partners. According to Sphere, a formal process has started to introduce a new
partner capable of assisting with development of the project.

SOUTH AFRICA

South Africa’s production increased by 18 per cent, from 41.6 Mt in 2007 to 49.0 Mt in 2008.
The country accounts for more than 75 per cent of Africa’s total production and exports. The
sharp increase in production compared to 2007 comes after a period in which the South
African growth rate was below those of the other important iron ore producing countries.
Between 2003 and 2007, the growth was only 9.2 %. South African exports of iron ore
increased by 8.0 per cent to 32.8 Mt in 2008, up from 30.3 Mt in 2007. The most important
countries for South African Export are China, Japan, Germany and the United Kingdom.

Kumba Iron Ore, previously Kumba Resources, is the largest producer of iron ore in Africa.
It was spun off from previously state owned Iscor (now part of Arcelor Mittal Steel), the
largest South African steel producer, in November 2001. There are still close links between
the two and Arcelor Mittal/Iscor has access to Kumba iron ore at a preferential price of
production costs plus 3 %. The company owns two iron ore mines, Sishen and Tabazimbi.
Together the two mines account for 75 % of the country’s total production. Sishen with its
34.0 Mt production in 2008 is by far the largest iron ore mine in Africa. Tabazimbi’s
production in 2008 was 2.7 Mt. Assmang is the second largest iron ore mining company in
South Africa and its Beeshoek iron ore mine produced 4.5 Mt in 2008. The mine is however
reaching the end of its economic life and will not be able to sustain its current output. For this
reason the Khumani iron ore mine was opened in 2008. At the Khumani iron ore mine
production reached 1.85 Mt in 2008. At the present production rate the mine life is in excess
of 40 years. There are already plans to increase production. Assmang is partly controlled by
Patrice Motsepe’s African Rainbow Minerals (ARM). Highveld Steel & Vanadium, which
operates the captive Mapochs vanadium/iron ore mine, produced an estimated 2.0 Mt in the
year 2008.

In 2001 Iscor, the integrated steel company, which until 1989 was owned by the government
of South Africa, split into two companies, Iscor and Kumba Resources. All mines and mining
assets came to belong to Kumba Resources. By December 2003 Anglo American got full
 31

control over Kumba Resources with over 66 per cent of the equity. This was contrary to an
earlier agreement with South African government to keep the Anglo share of Kumba below
49 per cent. With the empowerment deal announced in October 2005 and finally executed in
late 2006, Anglo was able to honour its earlier commitments. Kumba was divided into two
parts: Kumba Iron Ore containing the iron ore mines and projects, and a second company with
all other assets, now named Exxaro. Anglo American holds a 63.4 % share in Kumba Iron
Ore, which in its turn own 74 per cent of the Sishen Iron Ore Company (SIOC). The balance
in SIOC is held by Exxaro (20 %) together with SIOC Community Development Trust (3 %)
and SIOC employees (3 %). Anglo American also owns 9.9 per cent in Exxaro. The 36.6 %
balance in Kumba iron is owned by government controlled Industrial Development
Corporation IDC (13.1 %) and other minority interests (23.5 %).

Kumba has an aggressive long term strategy and its project pipeline includes plans to expand
iron ore production in the Northern Cape province to 50 Mt/a by 2013. This expansion is
however dependent upon market conditions and rail and port expansions. The current 861 km
railway line from the mines to the Saldanha Bay harbour north of Cape Town does not have
the capacity needed at present. Currently some 27 Mt/a of iron ore can go on the railway. The
port at Saldanha Bay is expanding its capacity to 38 Mt/a and the upgrade of the railway to
accommodate the expansion plans is scheduled to be complete in 2009/2010.

Indian steel company Tata has announced that it intends to start iron ore production of 1-2
Mt/year in cooperation with a so called black empowerment company, Sedibeng. This is the
first inward investment into South African iron ore mining.

OTHER AFRICA

Production of iron ore in 2008 in Egypt, Algeria, Zimbabwe and Tunisia is estimated at 3.9
Mt. The entire production of these countries is consumed domestically. In Egypt, the state
owned Egyptian Iron & Steel Company operates the El-Gedida mine in the northern part of
the country. Production in 2008 remained at just about 2 Mt. Algeria has two iron ore mines,
Bou Khadra and Ouenza, both operated by Mittal Steel Tébessa, which is in turn owned by
ArcelorMittal Annaba, which is part of the Arcelor Mittal group. This company is jointly
owned by the state (30 %) and Arcelor Mittal (70 %). Production in 2008 was 1.7 Mt. In
Zimbabwe, production has more or less stopped. Iron ore in Zimbabwe was mined by the
Buchwa Iron Mining Company Ltd at its Ripple Creek mine. There has been a shortage of
iron ore in Zimbabwe but the country has not been able to import any because of lack of
foreign currency.

The state controlled Zimbabwe Iron & Steel Company Ltd (ZISCO) is the owner of the
operation in Zimbabwe. In March 2006 a deal was made between ZISCO and India’s Global
Steel Holdings. The latter was given a 20 year management contract for the steel plant which
would remain government owned in exchange for some 400 million Australian Dollars in
investments, but in the end the deal fell through. The iron and steel industry of Zimbabwe will
probably need many more years before it can return to the production figures of the eighties
and early nineties.

There is a minor state controlled iron ore operation in Tunisia supplying the local steel works.
Some 0.2 Mt of iron ore was produced in 2008. Production from the two mines, Djerissa and
Tamera, has been more or less constant during the last ten years.
 32

NORTH AMERICA

CANADA

Canadian shipments of iron ore decreased in 2008, down 5.9 % from 34.1 Mt in 2007 to 32.1
Mt 2008. This was the second year in a row of falling production. Exports also fell but by
less, from 28.3 Mt in 2007 to 28.2 Mt in 2008. Canadian imports, on the other hand, increased
by as much as 28 %, from 7.3 Mt in 2007 to 9.3 Mt in 2008.

There are three major iron ore mines in Canada: the Mt Wright mine, the Carol iron ore mines
and the Wabush Mines. The Mt Wright mine is operated by Quebec Cartier Mining (QCM)
and produced 13.8 Mt of iron ore in 2008. QCM is fully owned since 22 July 2005 by
Dofasco, which bought the shares of Caemi and the Québec government fund Investissement
Québec (33.3 % each). After the merger between Arcelor and Dofasco the mine has become
part of the Arcelor Mittal group. The Carol iron ore mines, owned by the Iron Ore Company
of Canada (IOC), increased production by 20 % to 15.8 Mt in 2008. The owners are Rio
Tinto, Japanese Mitsubishi Corporation and the Labrador Iron Ore Royalty Income Fund. The
third producer is the Wabush Mines, jointly controlled by Stelco, ArcelorMittal and
Cleveland-Cliffs, which produced 4.2 Mt in 2008, down from 4.6 Mt in 2007. Negotiations
for Arcelor Mittals acquisition of the total ownership of the Wabush mine that started in 2007
came to a halt in April 2008 without any changes to the ownership.

There are several projects in the pipeline in the Canadian Arctic. They are truly world class
projects in terms of their grades and quality but demand high investments and carry high
transport costs. Most of them will probably be put on hold in view of the present lower prices.

UNITED STATES

Production in 2008 was preliminarily 53.0 Mt, 1.1 % higher than in 2007. The proportion of
pellets in total production was roughly 90 % in 2008. This is a lot lower than last year when
almost all the production consisted of pellets. Exports, mainly to Canada, where some 81 %
end up, increased by 20 % in 2008 to 11.1 Mt. Imports were almost unchanged at 9.2 Mt,
down from 9.4 Mt in 2007 and 11.7 Mt in 2006. Canada and Brazil continued to be the two
major exporters to the United States, accounting for 92 % of imports. In 2008, imports from
Canada increased by 11 % and imports from Brazil decreased by 19 %.

The most important companies are Cliffs Natural Resources Inc (formerly Cleveland Cliffs
Inc), US Steel Corp and ArcelorMittal, which owns Ispat Inland Mining Company and
62.3 % of Hibbing Taconite Co. In April 2005 International Steel Group (ISG), containing
the remnants of Bethlehem Steel, Republic Steel and LTV, and Ispat Inland merged to form
Mittal Steel USA, which owns 100 per cent of Ispat Inland Mining Company. The Minorca
mine, fully controlled by Mittal Steel USA, produced at more or less full capacity in 2008 and
output reached 2.8 Mt. Mittal is also involved in the Empire iron ore mine through the
Empire Iron Ore Partnership together with Cleveland Cliffs Inc. The latter company, the
largest of the iron ore producers in the United States, also controls the iron ore mines
Northshore (Babbit), United Taconite (Eveleth) and Tilden. Cliffs Natural Resources Inc,
International Steel Group Inc and Stelco Inc of Canada are joint owners of the Hibbing iron
 33

ore mine. Total production of the mines and the percentage owned by Cleveland Cliffs are
shown in table 2.

Table 2. Iron ore mines in which Cleveland Cliffs holds an interest

Total Total
Ownership production 2007 production 2008
% Mt Mt
Empire 79 4.9 4.6
United Taconite 100 5.3 5.1
Tilden 85 7.2 7.6
Hibbing 23 7.4 8.2
Northshore 100 5.2 5.5

Two mines, Keewatin and Minntac, are wholly owned by US Steel Corp. Together they
produced 19.2 Mt in 2008. Approximately three quarters of the production comes from
Minntac which makes it the largest iron ore mine in the United States. Compared to 2007,
production at the two mines rose by about 1.6 %.

The mines in the United States are all located on the Marquette Range in Michigan and the
Mesabi Range in northern Minnesota. They are all relatively low grade taconite open pit
operations.

LATIN AMERICA

BRAZIL

Iron ore production in Brazil increased by 2.8 % in 2008 to an estimated 346 Mt. This is the
tenth consecutive year of growth in the Brazilian iron ore industry. Pellets production
decreased by 7.7 % from 54.2 Mt in 2007 to 50 Mt in 2008 and now represents 14 % of total
production. Exports grew, however, from 269.4 Mt in 2007 to 281.7 in 2008, up by 4.5 %. In
2007 Brazil exported 80 % of its total production. In 2008 this figure increased slightly to 81
%. In 2007 Brazil became the world’s largest producer as well as exporter of iron ore, but in
2008 it was the third largest producer after China and Australia and the second largest
exporter after Australia. The two largest export markets for Brazilian iron ore are Europe with
81.5 Mt and the Far East, represented by China, Japan, the Republic of Korea and Taiwan
Province of China, with 145.1 Mt. Exports to rest of the world were 55.1 Mt. Exports to
European markets rose by 2.0 % in 2008 and exports to the Far East decreased by 1.0 %.

Vale S.A. (Vale) formerly Cia Vale do Rio Doce (CVRD) changed its name in May 2009.
The company was rebranded Vale already in 2008 but in 2009 the legal name was also
changed. Vale is by far the largest producer in Brazil and in the world. According to the
company the production of iron ore and pellets reached 301.7 Mt in 2008, a decrease of 0.5 %
from 2007. In 2007 Vale produced 203.1 Mt from its Southern and Southeastern system, i.e.
the mines in the state of Minas Gerais. In 2008 this figure had gone down 3.6 % to 195.9 Mt.
In the Vales Northern system, i.e. the Carajás operations, production reached 96.5 Mt in 2008,
up from 91.7 Mt in 2007. Production of pellets was 44.8 Mt in 2008, the same as in 2007.
Ferteco Mineracao ceased to be an independent producer in 2001 and is included in the
figures for Vale and associates.
 34

Mineracoes Brasileiras Reunidas (MBR) used to be Brazil's second largest iron ore
producer. It is controlled by Vale and the mines of MBR have now been incorporated into the
Southern System of Vales iron ore mines. The production at the mines was 60.0 Mt in 2008
accounting for approximately 17 % of total Brazilian output in 2008. This means production
decreased with 12 % compared to 2007 when production was 68.3 Mt. Traditionally 85 % of
MBR’s production has been exported, an export that reaches almost all continents with China
as the main destination.

Production by Samarco Mineracao was 18.5 Mt in 2008. Current annual production capacity
of pellets is 13 million tons. Samarco operates three pellet plants. The first went into
operation in 1977. In December 1997 production capacity was doubled by the addition of a
new plant and in 2008 a third pellet plant was commissioned. Pellets make up an increasing
proportion of its production and there are plans for a fourth pellet plant that would raise
capacity by 40 %.

Companhia Siderúrgica Nacional (CSN), which operates the captive Casa de Pedra mine
in Minas Gerais, had a production in 2008 of 18.8 Mt. This represents an increase from last
year of 25 %.

MMX Mineracao e Metalicos SA, owned by EBX Group, is an emeerging producer with
two operating properties, MMX Sudeste System, and the MMX Corumbá System, as well
as ownership in IronX which operates the Amapa mine together with Anglo American.

In addition to these larger mines, a few other Brazilian producers of iron ore, including V &
M Mineracao, Mineracao Rio Verde, Mineracao Corumbaense Reunida and Mineracão
J. Mendes Ltda, together produced some 7-8 Mt in 2008. There are also a large number of
smaller producers delivering their production to Vale and to local pig iron producers. These
companies have become much more active in the last year or two following the clearance
obtained by CSN to export its ore over the railways earlier controlled by Vale. Some of them
have been acquired by foreign companies wanting to gain a foothold in Minas Gerais. At
present little information is available.

CHILE

Chile has one iron ore producing company, CMP Cia Minera del Pacífico, which produced
8.4 Mt in 2008, an increase of 7.1 % compared to 2007. CMP is a wholly owned subsidiary of
the Chilean steel producer CAP in which Mitsubishi Corp. has a 12.5 % shareholding and
Invercap SA has 31.3 %. Generally, iron ore exports in Chile have been falling since 1997
when they peaked at 7.1 Mt. In 2005, however, exports rose by 6.4 % to 5.9 Mt only to fall
again in 2006 to 5.8 Mt, In 2007 exports increased again to 6.7 Mt, only to fall in 2008 by 19
% to 5.4 Mt. Pellets production was unchanged but exports increased sharply. The pellets
share of total exports is now back to around 70 % as it was in 2005. In 2007 it was only 45 %.
The major market for Chilean iron ore is Asia where 95 % of 2008 exports went. The most
important countries are, in order of importance: China, Japan, Indonesia and Malaysia. CMP
mining operations are divided into two production areas: Elqui Valley with the Romeral
mine and Guayacan port; and Huasco Valley with the Agarrobo and Los Colorados mines.
The Agarrobo mine has begun its depletion phase and the Los Colorados mine is replacing it.
 35

There are several iron ore projects being considered in Chile, most of which belong to CAP.
Among the most interesting are the La Candelaria Tailing Deposit project which will take
care of the tailings from La Candelaria copper mine.

COLOMBIA

Colombia has three small captive mines, el Banco, el Uche and el Uvo, all of them operated
by the privately held steel company Acerias Paz del Rio. Production has increased over the
last years but has not reached above 1 Mt.

MEXICO

Mexico’s iron ore production in 2008 was 11.5 Mt (preliminary figure); this represents an
increase of 5.5 % compared to last year’s production of 10.9 Mt. Imports increased by about
24 % to 3.9 Mt in 2008. Almost all of the imports, or 69 %, come from Brazil. Other countries
exporting to Mexico are Peru, the United States, Trinidad & Tobago, Canada, and Venezuela.

Among the producers of iron ore in Mexico are Minera del Norte SA de CV, which owns
the Hercules mine; Consorcio Minero Benito Juárez Peña Colorada with the Peña
Colorada operation; Cia Minera las Encinas SA de CV, which owns and operates the
Aquila mine and the Nahuatl mine and ArcelorMittal Lázaro Cárdenas.

Arcelor Mittal has increased its interests in the Mexican iron ore industry lately through its
subsidiary ArcelorMittal Lázaro Cárdenas. In December of 2006 the company acquired
Sicartsa, in April of 2007 the acquisition was completed and the largest steel maker of Mexico
was formed. It now controls through ownership or long term contracts on cost plus basis 100
% of the mines Las Truchas and Volcan, the latter commenced operation in 2008, and 50 %
of the Peña Colorada mine. The Peña Colorada mine is operated by Consorcio Minero
Benito Juárez Peña Colorada.

Mexico exports some of its iron ore, mainly to China. In 2008 total exports were 1.9 Mt, of
which 1.1 Mt or roughly 60 % went to China.

PERU

Peru’s only iron ore producer, Shougang Hierro Peru SA., fully owned by the Chinese state
controlled Shougang Group, which operates the Marcona open pit mine, produced 7.9 Mt
during 2008, the same amount as last year. In 2008, almost 91 % of the total production, or
7.2 Mt, was exported. This represents a decrease in exports of about 2.3 % from the 7.4 Mt
exported in 2007. China received 5.4 Mt or 75 % of total exports. Other important
destinations are Japan, Mexico and the Republic of Korea. Exports to all of these countries
decreased in 2008 while exports to China increased. Pellets production has been gaining in
importance in Peru but since 2007 production has decreased. In 2008 it fell by 16 %. Of the
total production roughly 30 % was pellets, a decline from the 35 % last year. Exports of
pellets have decreased over the last years and in 2008 they declined by 14 %. A couple of
 36

early stage iron ore projects in Peru are under way as well as an expansion of the Marcona
iron ore mine.

VENEZUELA

In 2008, Venezuela produced some 21.5 Mt of iron ore, an increase of 3.9 % from 20.7 Mt in
2007. There are three iron ore mines in Venezuela: Las Pailas, Los Barrancos and San
Isidro. They are open pit mines and the state controlled company CVG Ferrominera
Orinoco operates all three. Venezuela exported around a fourth of its production in 2008.
Exports have decreased the last few years and 2008 was no exception. Some 5.5 Mt were
exported, mainly to China but also Europe had its share. This represents a decreased of 16 %.

Venezuela is estimated to have produced 7 Mt of pellets in 2008. The pellets plant operated
by Ferrominera has a capacity of 4 Mt and Sidor, a privately owned steel producer, provides
the balance. Sidor buys ore from Ferrominera for its pellets production.

Venezuelan exports of iron ore goes mainly to Asia and Europe. China is the single largest
importer with 2.9 Mt in 2008, down 23 % compared to 2007. The most important customers
for Venezuelan iron ore in Europe are Belgium with 0.9 Mt, the Netherlands with 0.3 Mt, the
United Kingdom with 0.3 and Spain also with 0.3 Mt.

ASIA

CHINA

After seven years of consecutive increases of production in China the production for 2008
stayed the same as in 2007. Production of run of mine ore as reported by CISA was 824 Mt.
The average grade of Chinese iron ore output is reported to be steadily but slowly declining
and was around 30 % in 2004, varying from as low as 12 per cent to 56 per cent in a few high
grade mines. During the last years the average grade of iron ore has probably gone down as
most capacity expansion has taken place in the small mines. In the calculations carried out for
this report the figures are adjusted for the lower grade in order to obtain a figure for Chinese
iron ore production that is comparable to data for the rest of the world. With this conversion
the corresponding concentrate grade would be 64 %, which is the actual reported average
concentrate figure. Detailed Chinese statistics, which are available for the major mines, give
both run of mine ore and concentrate volumes. Summary statistics are available for medium
size and small mines.

When analysing the Chinese situation one of the major difficulties concerns the apparent
discrepancy between the iron content of the pig iron produced in China and the reported iron
units supplied by imports and local mine production. This discrepancy was particularly
important in 2008 and led to considerable confusion, since it appeared that a lot more iron ore
was produced locally than could reasonably be needed. In order to try to clarify some of these
aspects the demand for iron units has been calculated based on the amount of pig iron
produced during the latest eight years. The starting point is that pig iron production figures
should be more reliable both with respect to volume and iron content than the iron ore
production and grade figures. In Table 3 it is assumed that the iron content of pig iron is 94 %
 37

and that the grade of imported iron ores is 63 %. The iron content actually needed from
domestic suppliers in order to produce the reported pig iron is then calculated.

Table 3. Chinese iron ore production revisited: discrepancies in statistics (Mt)

Gross Iron
volume content
1. Pig iron production 468 440
2. Imported ore (63% Fe) 444 280
3. Calculated need for domestic ore (1-2) 160
4. Stock build-up 25
5. Loss in concentration 12
6. Loss in transport 9
7. Loss in steel making 21
8. Adjusted domestic ore need (3+4+5+6+7) 227
9. Reported ore production (8 at 27.5 %
Fe) 824
10. Ore production adjusted to 63 % Fe 362

Sources: CISA actual pig iron, imported and domestic ore figures. All assumptions about iron content
are made by Raw Materials Group in cooperation with Jacques Astier.

As seen from table 3, these calculations imply that 160 Mt of iron would have been needed
from the domestic mines. According to official statistics, however, production of run of mine
ore was 824 Mt, meaning that the iron content would have been 19 %, rather than the usually
estimated 25-30 %. Several explanations are possible and they all contribute to the apparent
discrepancy. The consequent adjustments are shown in table 3.

Stock variations are one obvious explanation. Stocks built up in late 2008 as a result of ore
deliveries having been scheduled before the steel industry reduced its production rate. Stocks
in major ports were reportedly 61 Mt at the end of 2008 and some reports put them as high as
100 Mt. It is estimated that the stock build-up in 2008 was 25 Mt Fe, or about 40 Mt of iron
ore at internationally traded grades.

Some iron is lost in concentrating iron ore to a grade that can be used by sinter or pellets
plants. This loss has increased as a portion of total ore production since the expansion of
Chinese iron ore mining has entailed bringing many low grade deposits into operation. Thus,
a larger portion of ore production needs to be concentrated and, as average grades decline,
proportionally more is lost in processing. The total loss in the concentrating process in 2008 is
estimated at 12 Mt iron content.

Some material is also lost in transport. It is estimated that this amounted to 9 Mt in 2008.

Finally, some iron is also lost in steel making. In 2008, this loss is estimated at 21 Mt Fe.

The calculations in table 3 show that when the factors just described are taken into account,
the need for domestic production increases by 67 Mt of Fe to 227 Mt, corresponding to 824
Mt reported at an inferred grade of 27.5 % and 362 Mt when converted to internationally
traded ore at 63 %.
 38

Two other factors may be important: average ore grades may have fallen in 2008 compared to
previous years and improvements in official statistics may mean that production has been
underestimated earlier, resulting in an exaggerated estimate of ore grades. The production
figures shown in table A1 have been adjusted for considerable under reporting in 2007 (which
is not too surprising, considering that the boom in iron ore production resulted in many
marginal deposits being brought into production, presumably taking statistical agencies by
surprise). Production figures have also been adjusted to take into account a gradual fall in the
grade of run of mine ore from30 % Fe in 2004 to 27.5 % in 2008.

A number of important conclusions can be drawn from this discussion:

• Local iron ore production in China has been and continues to be much more dynamic
than both outside observers and Chinese authorities believed to be possible.
Production has been growing faster than what has been generally assumed. With the
high prices of imported ores domestic production flourished until late 2008.
• The average grade of Chinese production is likely to be lower than the 30 % often
assumed because it would be difficult to find high grade ores to replenish depleting
reserves and any additional reserves that have been exploited are likely to have been
of lower grade than the existing ones.

A factor complicating the analysis is the possibility of some volumes of imported ores not
being registered in the import statistics, perhaps from neighboring Vietnam or Democratic
People's Republic of Korea, and, more recently, Mongolia. These volumes should however
not be significant and the iron content of these ores is probably lower than those of ores from
Brazil and Australia.
The booming local iron ore industry had a somewhat dampening effect on the demand for
imported ore. But the small scale iron ore mines in China are for the most part high cost
operations. With falling prices a large portion of production will have to close down. Some
claim that 40 – 60 % of the small scale iron ore mines in China have already been closed. At
the same time it is important to note that the iron ore content of the large and medium size
mines are not worse than for example the iron ore mines in the United States.

China is by far the world’s largest importer of iron ore, accounting for 49 % of total imports
in 2008, when imports were 444.0 Mt, an increase of 16 % from 383.1 Mt in 2007. Imports
represented approximately 45 % of China’s use (corrected for the lower iron content of local
ores as described above), unchanged from 2007. It is widely believed that China's dependence
on imports will increase. Iron ore produced in China is usually of inferior quality to the
imported ore, and dependence on imports increases when prices fall.

The specific geological parameters of China, with few and small high grade deposits, have to
a large extent determined the structure of the Chinese iron ore industry. Forty-nine mines,
which are all classified as “major mines”, account for only 23 %, or 188.2 Mt of total
production, while ”medium & small” mines produce a much larger quantity of iron ore at
more than 636 Mt according to official statistics. There are over 8 000 iron ore mines in total.
In the official statistics, 3,867 are mentioned, of which 34 “large” mines, 43 “medium”, 1407
“small” ones and 2 383 “very small” operations. The “large” mines account for 45 per cent of
total production, “medium” 11 per cent, “small” mines 17 per cent and the “very small”
operations 27 per cent.
 39

The major and medium size mines often have higher grades, producing concentrates of a
quality comparable to the imported ores. The small and medium mines in general have
inferior deposits and less stringent quality controls. The ten most important mining entities are
shown in table 4.

Not only is the number of iron ore mines in China huge, the number of corporate entities is
also high. Most major and medium sized mines are operated as captive mines and are owned
by the major steel companies. These are in turn still mostly state owned. Only a few of the
major or medium mines are independent. 271 state owned enterprises account for 65 per cent
of the production, while 1,507 collectives produce 14 per cent and the remaining 21 per cent
is mined by over 2,000 privately held entities.

China is the most dynamic force in the global iron ore market at present and will continue to
play that role for years to come. With steel demand slumping across the globe China
continues to increase its production, although at a slower pace than in recent years (the World
Steel Association forecasts a slight decrease in production for 2009 but statistics so far
suggest a slight increase). Falling prices and good availability of good quality imported iron
ore means that local production is likely to decline substantially. Imports will therefore grow
in 2009.

China has two alternative ways of securing its import needs:

• Investing in joint ventures in iron ore production abroad

• Securing long-term contracts at set price levels
 40

Table 4. Major iron ore mining companies of China

2007 2008
Iron ore Concentrate Iron ore Concentrate
(Mt)
1 Anshan Iron & Steel Corp. 42.51 14.50 47.73 16.86
Dagushan mine
Dong’anshan mine
Yanqinanshan mine
Qidashan mine
Gongchangling mines
Anta mine
Anqian
2 Benxi Steel 16.25 6.33 16.66 6.28
Nanfen mine
Waitoushan
3 Panzhihua Iron & Steel Corp. 11.70 5.01 16.20 6.20
Lanjian mine
Zhukuang mine
Baima
4 Baotou Iron & Steel Corp. 12.67 4.76 12.90 4.72
Baiyun mine
Gongyiming
5 Taiyuan Iron & Steel Corp. 11.24 4.36 12.29 1.06
Ekou mine
Jianshan mine
6 Shougang Corp. 8.43 4.63 9.31 5.01
Dashihe mine
Shuichang mine
Xunshan
7 Ma’anshan Iron & Steel Corp. 8.53 2.84 9.04 2.57
Nanshan mines
Ao'shan
Dongshan
Gaochun mine
Gushan mine
Taochong mine
8 Hanxing Mines 5.58 2.88 6.01 2.75
Fushan
Yushiwa
Kuangshancun
Yuquanling
Xishimen
Tuancheng
Beiminghe
Gaoyang
Nuopu
Kaifa
9 Wuhan Iron & Steel Corp. 4.72 3.31 5.05 3.66
Daye mine
 41

Jinshandian mine
Chengchao mine
10 Shanghai-Meishan 3.48 2.21 3.36 2.07
Shanghai-Meishan

Source: China Metallurgical Newsletter, 2009.

 42

Table 5. Selected iron ore operations outside China with Chinese ownership

Mining projects Location JV shares

Cloud Break Western Australia Fortescue
Baosteel Group
Eastern Range Iron Ore Western Australia Hamersley Iron 54 %
Baosteel Group 46 %
Karrara Project Western Australia Gindalbie Metals
Anshan Iron & Steel 12.7 %
Cape Lambert South Western Australia MCC
Evraz
CITIC Pacific Sino Iron Project Western Australia CITIC Pacific Mining
MCC
Balla Balla Iron Ore Western Australia Aurox Resources
RockCheck Steel Group
Wheelarra Project Western Australia BHP Billiton Group
Wugang
Maanshan
Jiangsu Shagang
Tangshan
Channar Iron Ore Mine Western Australia Hamersley Iron 60 %
Sinosteel 40 %
Koolanooka, Weld Range, Jack Hills Western Australia Sinosteel
Tallering Peak, Extension Hill, Koolan Island Western Australia Mount Gibson Iron
Shougang Group
Central Yilgarn Iron Ore Project Western Australia Jupiter Mines
Haoning Group
Southdown Magnetite Project Tasmania, Australia Grange Resources
Kemama Pellet Project Australian Bulk Minerals
Savage River Operations Stemcor
Jiangsu Shagang
Francis Creek Iron Ore Northern Territory, Australia Territory Resources
Noble Group
Bungalow Magnetite Iron Ore Deposit South Australia Centrex Metals
Baotou Steel
Southern/ South central Iron Ore Deposit South Australia Centrex Metals
Wuhan Iron & Steel
Wilcherry Hill/ South Australia Iron Clad
Hercules Iron Ore Deposit Wuhan Iron & Steel
Cairn Hill Project South Australia IMX Resources
Tonghua Iron & Steel
Wiluna West Iron Ore Project South Australia Golden West Resources Ltd.
Hunan Valin Steel Tube & Wire Co
Cambodia Iron Ore Cambodia WISCO
Baosteel
AnSteel
Shougang Group
Madagascar Resource Development Project Madagascar WISCO
Jinxing International
Belinga Iron Ore Project Gabon Chinese Consortium
 43

As in the past, both routes will be used to secure future supplies. A supplementary alternative
is to start grass roots exploration for iron ore and three years ago the Ministry of Finance
established a special fund for overseas exploration to secure the raw materials needs of
Chinese companies. So far, however, most of these funds have been used for M&A activities
abroad and the exploration activities have been low key. It is probable, however, that
exploration activities will become much more important and it is only a matter of time before
green field discoveries will be made by Chinese exploration companies. In Africa, Chinese
exploration for iron ore has been reported from a few countries, including Algeria, where the
Gara Djebilet project has been studied. In Gabon, where China National Machinery &
Equipment Import & Export Co was cooperating with CVRD and Eramet until mid 2006 in
the Belinga project, the other partners were ousted when the Chinese offered a 500 MUSD
facility towards the construction of a port and railway.

INDIA

India is the world’s fourth largest producer of iron ore. Its iron ore production has increased
continuously over the last nine years and in 2008 it rose by 3.4 %, to 214.0 Mt, compared to
206.9 Mt in 2007. Exports of iron ore increased by 8.2 % to 101.4 Mt, up from 93.7 Mt in
2007. Indian producers and exporters have been quick to exploit the exceptionally profitable
spot market opportunities created by rapidly growing Chinese demand. Since 1996 exports to
China have increased from 4.3 Mt to 91.0 Mt. On the other hand, exports to Japan fell by 57
% between 1999 and 2008. The entire increase in production of iron ore since 2003 was
export driven and came from existing mines. No major green field project has been
undertaken in India for more than two decades.

Production is spread all over India. Chhattisgarh, Karnataka, Orissa, Jharkand and Goa are the
most important iron ore producing states. Chhattisgarh used to be the largest producer of iron
ore, but in 2002 both Karnataka state and Orissa overtook it and in 2007 Orissa state was the
most important iron ore producing state in India. Statistics from India are published later than
in the rest of the world and hence no detailed figures for 2008 are available at the time of
writing. Moreover, the non-calendar fiscal year of India, which is also used in statistics,
causes problems when comparing Indian statistics to data from other countries.

The Indian iron ore sector is highly fragmented. Most mines are small compared to other iron
ore mines in the world. In 2007 there were 261 reported iron ore mines in India. Some of the
larger are Bailadila 14 iron ore mine, Bailadila 6 iron ore mine and Donimalai iron ore mine,
all three owned by National Mineral Development Company (NMDC) which controlled
production of 28.2 Mt in 2007; Dalli, Bolani, Kiriburu and Meghahataburu iron ore mines,
owned by Steel Authority of India (SAIL) with a controlled production of 26.2 Mt in 2007.
Both companies are controlled by state or central government. Kudremukh iron ore mine,
owned by Kudremukh Iron Ore Company (KIOC) was forced to close its operation by
December 31st 2005 because new permits were not granted for the operations, which are
partly located in environmentally protected areas. Other large iron ore mining companies are:
Essel Mining & Industries Ltd. With a controlled production of 14.9 Mt in 2007, Sesa Goa
with 11.6 Mt and Tata Iron & Steel Co (Tisco) with 11.4 Mt originating from mainly two
mines, Noamunid and Joda East. Captive mines accounted for 23 % of total production in
2007 down from 33 % in 2005 but the same as the year before. The private sector, with 62 %
of total production in 2007, contains a much larger number of companies. There were some
 44

80 mining leases actively operated in Goa in 2007-2008. All producers use the same export
facilities but apart from that they are all independent.

India is a relatively important producer of pellets, and both production and capacity have been
increasing over the last couple of years. In 2008, production reached its highest level to date
at an estimated 17.5 Mt, which is close to the capacity ceiling. Exports of pellets increased to
5.5 Mt in 2008 but are still lower than the 7.3 Mt reached in 2005. About 65 % of pellets
exports go to China.

IRAN

Iranian iron ore production was estimated to be 20 Mt in 2008, 9.1 % lower than in 2007. This
marks the end of the increasing trend which began in 2003 when production was only 11.5
Mt. Iranian imports of iron ore decreased slightly last year and amounted to 1.1 Mt. Exports
in 2008 was estimated to be 3.8 Mt, a decrease of 4.7 % compared to 2007.

Iran has two major companies involved in iron ore mining: the state owned National Iranian
Steel Co (NISCO), which controls the Sangan and Shamsabad mines; and the Iran
Minerals Production & Supply Co, also owned by the state, which controls the three most
important mines in Iran, the Chogart mine, the Gol-e-Gohar mine and the Chadormalu
mine. Both the Chogart mine and the Gol-e-Gohar mine are in the process of expanding
capacity. In addition to these major mines, there are also a number of smaller mines
producing altogether not more than 0.5 Mt. Plans to increase iron ore production further have
been proposed but expansion has been slow and with the current uncertainty in the iron ore
market most of these projects will probably be put on hold.

JAPAN

Japanese iron ore imports rose again in 2008, from 138.9 Mt in 2007 to 140.4 Mt, up 1.1 %.
Japan was for a long time the world’s largest importer of iron ore, but in 2003 it was
overtaken by China. Together the two countries imported 584.4 Mt of iron ore in 2008,
accounting for more than 60 % of total world imports of iron ore. The most important source
of Japanese iron ore imports is Australia with 82.2 Mt in 2008, down 1.3 % on 2007.
Australia represented roughly 60 % of Japan’s total imports. Imports from Brazil were 36.3
Mt in 2008, up 18 %, and representing around 26 % of total imports. India supplied 6.9 Mt,
down about 13 %, and accounted for 4.9 % of total imports. South Africa with 6.6 Mt, up 2.4
%, represented 4.7 % of total imports.

In February 2009 the Japanese government through Japan Oil, Gas and Metals National
Corporation (Jogmec) supported Japanese companies' access to iron ore overseas for the first
time. Jogmec provided loans to Sojitz and Itochu amounting to a total of 1.09 billion JPY to
respectively carry out a feasibility study of the Southdown magnetite project on the southern
coast of Western Australia and do a first resource estimate of the Roper Bar project in
Northern Australia. Jogmec has traditionally only engaged itself in base metal and ferro
alloying metals projects.
 45

REPUBLIC OF KOREA

Iron ore production in the Republic of Korea has been fairly constant at around 0.2 Mt during
recent years. In 2008, estimated production was 0.2 Mt. There is only one iron ore mine in
operation: Sinyemi, owned by a local Korean company. Production is used for non-steel
purposes In 2008, the Republic of Korea became the worlds’ third most important iron ore
importing country with imports of 49.5 Mt, up 7.3 % from 2007. Australia and Brazil are the
two most important sources. Imports from Australia in 2008 were 34.1 Mt, up 9.5 % from
31.2 Mt in 2007, and from Brazil 12.1 Mt, up 17 % from 10.4 Mt in 2007.

TAIWAN PROVINCE OF CHINA

Taiwan province of China has no iron ore mines. Imports in 2008 were 15.6 Mt. Since the
year 2000, imports have been quite stable at around 15 Mt. Australia accounted for 10.9 Mt or
70 % of imports in 2008, up 5.8 %. Imports from Brazil were 4.0 Mt or 26 % of total imports,
down 11 % on 2007. The third most important supplier country was Canada with 0.5 Mt or
3.2 % of imports. Together these three countries account for almost more than 99 % of
Taiwan province of China’s total iron ore imports.

TURKEY

The production of iron ore in Turkey was estimated to be 3.7 Mt in 2008. There are four
regions suitable for iron ore mining in Turkey: Sivas-Malatya-Erzinca, where two thirds of
Turkish iron ore is produced, Kayseri-Adana, Ankara-Keskin and Western Anatolia. These
four regions are estimated to have some 150 Mt of resources with an average of 55 % iron
content. At present there are approximately 20 iron ore mines in production.

Divrigi Hekimhan Mining Concerne with its 14 iron ore deposits was acquired by Erdemir
in April 2004. The company was renamed Erdemir Madencilik Sanayi ve Ticaret AS
shortly after. Erdemir Maden located in the Divrigi province of Sivas is responsible for 50 %
of Turkey’s iron ore production and meets 20 % of domestic demand. The operation has a
capacity of 2.2 Mt run of mine ore. Erdemir Maden also operates Turkeys only iron pellet
plant with a capacity of 1.5 Mt. In 2006 Erdemir Maden produced 1.1 Mt of pellets and 0.7
Mt of other iron ore products.

Iron ore production has been stable at around 3.5-4.5 Mt during the last ten years. Imports
have been growing slowly during the same period and reached 6.9 Mt in 2008, up 12 % from
2007.

There are three vertically integrated steel mills in Turkey which control iron ore production,:
Kardemir, Eregli Demir ve Celik Fabrikalari T.A.S. (Erdemir) and Iskerderun Demir ve
Celik A.S. (Isdemir). Kardemir, which was established already before the Second World
War, is the oldest. Erdemir became the second Turkish steel works when it was founded in
1965, while Isdemir followed ten years later. Kardemir is privately owned and has a capacity
of some 1 Mt of crude steel. Erdemir and Isdemir were merged in 2002 when Isdemir was
privatized. They have a joint crude steel capacity of a little less than 5 Mt. Total iron ore
consumption at combined Erdemir and Isdemir is 7 Mt/year while demand at Kardemir is
between 1-1.5 Mt annually. The privatisation of the remaining 46 % of Erdemir still owned
 46

by the Government has been postponed several times. In late 2005, Arcelor, which already
holds a 5 per cent stake, made an agreement with the Turkish pension fund Oyak to acquire
jointly 49.3 per cent of Erdemir, but when Arcelor was not granted approval from the Turkish
Competition Board in time, Oyak completed the acquisition on its own. Mittal Steel and
competing Global Steel Holdings have also shown interest in the Turkish privatisation.

Isdemir has captive mines at Divrigi and Hekimhan, the latter producing manganese rich
ores. These are the most important mines in Turkey, accounting for 50 to 60 % of total
production. The Kafa mines in the Divrigi district together have a capacity of some 1.5 Mt of
iron ore including pellets. The capacity of manganese ores at Hekimhan is around 650 kt/y.
The second most important iron ore region contains the Attepe and Mentes mines, which have
a total capacity of some 1.2 Mt, equal to about 30 % of total production.

OTHER ASIA

There is some production of iron ore in Indonesia, Malaysia, Thailand and Vietnam. The
mines in these countries are small in scale. Together their estimated production was 3.5 Mt of
iron ore in 2008, more or less the same figure as for 2007. Production in the first three
countries is mainly for non-steel uses, but the high prices of the last years have also
stimulated exports to China.

The Vietnam Steel Corporation, which is operating the mines Trai Cau, Nui De, NaLung
and Ham Chim, dominates Vietnamese iron ore production. There are some projects in
progress in Vietnam but even after these are completed the total output of iron ore will still be
fairly low. Exports to neighbouring China have already begun at a level of some few hundred
thousands of tonnes. The balance of Vietnamese production goes to local steelworks.

The Democratic People's Republic of Korea used to have an industrial scale iron ore capacity
of as much as 10 Mt in the 1970s and 1980s. Due to lack of maintenance and replacement
investment, capacity has slowly dwindled. During the early 2000s production was minimal. It
has been reported that three to four larger mines, with the open pit Musan being the biggest,
are under rehabilitation and the authorities are investing in new equipment and upgrading the
transport facilities from the mine both to local steelworks and for exports to China. At this
stage the only producing mine is Musan. Development of the country’s iron ore industry may
be speeded up after the influential and financially strong Chinese trader and miner China
Minmetals has taken a direct interest in its development. Production has increased during
recent years and is at present estimated at around 1 Mt.

OCEANIA

AUSTRALIA

Australia is the world's second largest producer and the largest exporter of iron ore.
Production rose by 17 % in 2008 compared to 2007 and exports grew by 16 %. Australia’s
total production reached 349.8 Mt while exports grew to 309.3 Mt. Exports to Japan
decreased by 0.7 % in 2008 and were 76.8 Mt, down from 77.3 Mt in 2007. Exports to the EU
decreased by 5.3 % and were down to 5.9 Mt in 2008. By contrast, exports to China grew by
29 % and reached 183.2 Mt in 2008. Since 1999, exports to China have grown by more than
 47

560 %. Exports to the Republic of Korea are also increasing and in 2008 they amounted to
33.3 Mt, up 9.2 % compared to 2007.

Rio Tinto is the largest of the iron ore mining companies in the country and ranked fourth
among mining companies in the world over all. In its wholly owned Hamersley operations,
which include Mount Tom Price, Brockman, Homestead, Nammuldi, Paraburdoo, Marandoo
and Yandicoogina iron ore mines, the company produced 95.6 Mt in 2008, up by 1.0 % from
94.6 Mt in 2007. The Channar iron ore mine is a joint venture between Hamersley, which
owns 60 %, and China Iron & Steel & Trade Group Corp, which owns 40 %. The mine
produced 10.4 Mt in 2008, down 1.6 % from 10.6 Mt in 2007. Eastern Ranges iron ore mine
project was put into production in the beginning of 2004. In 2008 it produced 8.2 Mt, up from
last years’ 6.9 Mt. The mine is expected to have a capacity of 10 Mt per year when in full
production. Eastern Ranges is owned by Hamersley (54 %) and Shanghai Baosteel Group
Co Ltd (46 %). Robe River Iron Associates is another of Rio Tinto's iron ore operations. In
2008 the iron ore mines Pannawonica, Pannawonica Deposit J and West Angelas produced
50.3 Mt, down from 51.5 Mt in 2007. The Robe River joint venture, originally between
North Ltd and a Japanese consortium, is now controlled jointly by Rio Tinto, Mitsui & Co
Ltd, Sumitomo Steel and Nippon Steel.

The other major producer of iron ore in Australia is BHP Billiton. The company operates the
wholly owned Jimblebar iron ore mine and the joint ventures Yandi, Mt Neewman,
Goldsworthy and Area C iron ore mines. The total production from these mines was 127.4
Mt in 2008, compared with 111.6 Mt in 2007, an increase of about 14 %.

Fortescue Metals Group, which shipped the first iron ore from its Cloud Break Iron Ore
Mine in Western Australia in May 2008, after a record breaking short project implementation
time, has become the third largest producer of iron ore in Australia. Total production reached
19.5 Mt in 2008 with ramping up to come.

There are also some smaller producers of iron ore in Australia. One Steel Ltd, spun off from
BHP Steel with its Whyalla iron ore mine, has produced between 3.5 and 5 Mt for the last
couple of years. In March 1997, ABM purchased the assets of the Savage River Project from
the Tasmanian Government. The operation is designed to produce around 2.5 Mt annually of
pellets. One Steel’s long term plan is to reach a capacity of some 6.0 Mt/a of iron ore
production by 2010. In 2009 Grange Resources Ltd. acquired the Savage River Iron Ore
Mining operations. The mine, which has changed owners several times during the last couple
of years, was meant to cease mining in 2009 due to depletion. However a feasibility study
performed in 2006 showed that the mine life could be extended to 2023. The operation is
designed to produce around 2.5 Mt annually of pellets. Portman, which operates two mines,
the Koolyanobbing deposit with an output of 7.3 Mt in 2008 a slight decrease from last year,
and the Cockatoo Island mine, which produced 1.4 Mt in 2007 but only 0.8 Mt in 2008, is
controlled by Cleveland Cliffs (80.5 %) which took it over in the first half of 2005.

NEW ZEALAND

New Zealand has two beach sand operations located in the same area on the west coast of the
north island, Waikato North Head and Tahoroa. The two operations are owned by New
Zealand Steel and produce iron ore sand, both for export and for local consumption at the
company’s steel works at Glenbrook, south of Auckland. New Zealand Steel is in its turn
 48

controlled by Bluescope Steel, which was spun off from BHP in the early 2000s. In 2008 the
two mines are estimated to have produced 2.3 Mt. In 2008, New Zealand’s exports declined
by 20 %, and are now 0.5 Mt. Exports were traditionally shipped to Japan but in recent years
China’s importance as an importer has been growing and it is now by far New Zealand’s
most important foreign customer. In August 2008 Bluscope Steel announced an agreement
with Cheung Kong Infrastructure on the sale of its Taharoa Iron Sands Business for 250
MNZ. In December 2008 the deal was however refused by the New Zealand Overseas
Investment Office and Cheung Kong Infrastructure consequently cancelled the purchase
contract.
 49

IV. COMPANIES IN THE GLOBAL IRON ORE INDUSTRY

CONSOLIDATION

Brazilian Vale still holds the position as the undisputed largest iron ore producer of the world.
In 2008 Vale controlled 303 Mt of iron ore production. This was the first decline in many
years, down from a high of 308 Mt in 2007. Vale's share of total world production was 17.3
per cent in 2008, down from 18.8 per cent in 2007. The decrease was due to both drastic cuts
in production in the last quarter because of the collapse in the North American and European
steel markets, which hit Vale harder than its Australian competitors, and to the quick growth
in total world production resulting from higher production in Western Australia and South
Africa. The frantic expansion rate of the iron ore industry becomes clear when looking back
and realising that it was only in 2004 that the then CVRD’s production exceeded 200 Mt for
the first time. The three largest companies, including Rio Tinto and BHP Billiton in second
and third place, with most of their production in Australia, together controlled 33.7 per cent in
2008. The market share of the "Big Three" decreased by more than 1 percentage unit (22 Mt)
from 2007. Rio Tinto increased its production by only 8 million tonnes after having cut down
in the last quarter and this resulted in a marginal loss of market shares down to 8.7 per cent.
BHP Billiton, in third place, did not reduce production but increased its total output by 15 Mt
instead and its market share to 7.8 per cent. The “Big Three” have not managed to increase
their production quite as fast as total world production and their share has now fallen from a
high of 36 % to less than 34 %, mainly because of a fast expansion by small producers in
India and China in 2005-2007 and in late 2008 also because of cuts in production.

Corporate concentration in the iron ore industry at the level of the largest, the three largest
and the ten largest companies therefore fell in 2008. The long continuous trend of increasing
concentration seems to have been broken. It is however not at all certain that this reversed
trend will be confirmed. It is mainly due to both Vale and Rio Tinto having taken leading
roles in cutting production to support prices. They will both be ready to increase their
production sharply should demand increase. It is further likely that a severe fall in Chinese
domestic production with widespread mine closures - the Great Chinese Shakeout - will take
place in the next few years. These two factors could help catapult the total share of production
controlled by the Big Three back to or even beyond the top levels of 2003-2005 in a few years
time. The iron ore industry has been consolidating more or less continuously since the 1970s
(see Table 6) and the process of consolidation has been more or less completed, except in the
CIS countries and China. But the concentration process has been by leaps and bounds. The
pace has been slow in periods of only organic growth, such as the late 1990s, but much faster
in times of intensive merger and acquisition (M&A) activity, for instance, between 2000/03
and in 1997 when CVRD was first privatised.
 50

Table 6. Iron ore market consolidation 1975-2007

Market share of largest producers

% of total world production
1 3 10

2008 17.3 33.7 48.4

2007 18.8 34.9 50.7
2006 18.2 34.7 51.2
2005 18.5 36.4 54.4
2004 18.5 36.3 53.4
2003 17.8 36.1 54.1
2002 14.5 30.0 46.5
2001 15.5 32.0 47.5
2000 11.7 26.2 42.7
1995 9.5 21.0 37.2
1990 8.7 17.8 33.2
1975 5.3 11.3 26.8
Source: Raw Materials Data, Stockholm 2009.
Note: For details of the methodology used see Who owns Who in Mining, Raw Materials Group, 2001.

In spite of recent years’ attempts to create larger steel companies through M&A activities, the
iron ore producers are still one step ahead of the steel producers. But the gap is steadily
shrinking, both because of continued M&A in the steel sector and because of decreasing
concentration in iron ore. The ten largest crude steel producers control around 27 per cent of
world production while for iron ore the figure is 51 per cent. The iron ore industry’s level of
concentration is roughly on par with the average for other metal industries. It is interesting to
note that only one of the top five (but four of the top ten and six of the top twenty) steel
companies are Chinese in spite of the fact that China accounted for almost 38 per cent of
world crude steel production in 2008.

Another way of expressing the level of concentration is to use the Herfindahl- Hirschman
Index (HHI). This is the sum of the squared market shares of each company, a standard tool
used by the worlds’ antitrust watchdogs. The index is a function that summarises the structure
of an entire industry. or the ten largest controlling iron ore companies the index is 470 down
from 523 in 2007 and from a high of 562 in 2005, which is far below the 1 000 mark that the
United States Federal Trade Commission uses as the lower limit for a "moderately
concentrated" market.

MERGERS AND ACQUISITIONS

The mergers and acquisitions (M&A) activity dropped considerably towards the end of 2008
and has remained on a low level since then. After a period of limited M&A activity during
2004-2005, the period of high prices combined with the abundance of cash in both mining and
steel companies triggered another M&A wave in 2006 which continued all through 2007 and
ended in mid 2008.

The hostile and drawn-out take-over bid by BHP Billiton for Rio Tinto clearly dominated the
M&A scene in the mining sector during most of 2007 and into the second half of 2008 until
the bid was finally withdrawn by BHP Billiton in November 2008. BHP Billiton claimed that
 51

the deal was no longer in the interest of its shareholders but maintained that the benefits of
combining the iron ore assets (and other assets) of the two companies still made sense. With
sharply falling metal prices the risks associated with the bid simply became too big. The bid,
valued at around 150 billion US dollars, was the largest ever in the history of mining. One of
the key objectives for BHP Billiton was to be able to consolidate the Western Australian iron
ore industry and coordinate the operations of the two companies in this important iron ore
region. Although a large part of the value in the bid is attributed to Rio Tinto’s iron ore assets
the other metals produced are also important. Accordingly, the entire 150 billion cannot be
attributed to iron ore and hence the figure is not fully comparable to others in Table 7.

In early June 2009 it was announced that Rio Tinto and BHP Billiton had entered into a non-
binding joint venture (JV) agreement covering the entirety of both companies iron ore
operations and infrastructure in Western Australia. In this way both companies demonstrate
that the industrial logic that underlay much of the BHP Billiton bid in 2007 is still very much
valid. The new JV would reduce costs both in neighbouring operations and by shorter rail
hauls and by offering wider blending opportunities with the products of the two companies,
reduce management, procurement and general overhead costs, and finally make future
investments more effective. As is the case today, all production will be sold by two separate
marketing organisations. In addition, the proposed deal would include a payment of 5.8
billion USD from BHP Billiton to Rio Tinto to make it a 50/50 operation. As a result, the
proposed increased Chinese stake in Rio Tinto was not needed anymore and Chinalco, which
had bid for a part of Rio Tinto’s shares, withdrew its bid shortly after the announcement of the
new joint venture. Through the proposed deal with Rio Tinto the Chinese would have become
the largest shareholder in Rio Tinto by far. This possibility is now shut and the power of the
Big Three is maintained and even strengthened for the next couple of years. It is not yet clear
if the deal will have to be approved by the anti-trust authorities in the countries concerned but
for an outside observer at least, it is difficult to see how such close cooperation on producing
the iron ore will be possible while at the same time the sales people are completely separated.

Important M&A activity has also been noted in other countries, mainly Brazil, in recent years.
Although the latest M&A frenzy began in early 2006 it came to a high in mid 2008. The peak
was the Oslo based junior London Mining plc selling the Brazilian company Minas Itatiaiucu
with an operating iron ore mine in Minas Gerais producing 1-2 Mt/annum and with
considerable ore resources of good quality to Arcelor-Mittal in August 2008 for 810 MUSD.
London Mining bought the company in 2006 for 89 MUSD. Another deal reported in early
2008 was Usiminas, a Braizilian steel maker, acquiring the independent iron ore miner J.
Mendes for 925 MUSD in cash up front and 975 MUSD in future profit related payments.

The recent boom started in 2006 when CVRD acquired all the minority shares in Caemi. In an
all shares deal CVRD issued new stock to the holders of preferred shares in Caemi to a total
value of over 3,500 MUSD. CVRD also took over Rio Verde for 45 MUSD. Later, in early
2007, the Brazilian mining tycoon Eike Batista’s new MMX company clinched two major
deals. The first was announced in March when United States based Cleveland-Cliffs
completed a deal to buy 30 per cent of MMX’s Amapá project for 133 MUSD. In April a
second major deal was completed when Anglo American acquired 49 per cent in MMX
Minas-Rio from MMX and the second 30 per cent share holder in MMX, Rio Centennial
Asset Participacoes. Anglo American paid 1.15 billion USD which makes the deal one of the
largest ever in the iron ore sector. In 2007, interest turned to the smaller deposits and
companies active mainly in Minas Gerais. Kazakh Eurasian acquired Bahia Mineracao and
Noble Group took over Mhag Mineracao.
 52

In the United States, Cliffs consolidated its holdings by acquiring the 30 % of United Taconite
it did not previously hold for a complex consideration: 100 MUSD in cash, 1.5 million shares
and 1.2 million tons of iron ore pellets. Earlier in 2008 Cliffs cancelled its previous intention
to sell its 26.8 % interest in the Wabush mines joint venture to the majority owner
ArcelorMittal (Dofasco).

Table 7. Iron ore mergers and acquisitions, 1994-2008

Year Buyer Country Seller Country Share Target Country Value
% MUSD
2008 Severstal Russia Mano River UK 61.5 Putu Range deposit Liberia 37.5
Resources
2008 Severstal Russia n/a 6.3 Mano River UK 4
Resources
2008 Portman Ltd Australia n/a 10 Golden West Australia 21.4
Resources Ltd
2008 Eurasian Natural UK n/a 50 Bahia Mineracao Brazil 300
Resources Corp plc Limitada
2008 Western Mining Co China n/a 10 FerrAus Ltd Australia 16
Ltd
2008 Consolidated Canada n/a 100 Quinto Mining Corp Canada 152
Thompson Iron
Mines Ltd
2008 Red Rock UK n/a 3 Jupiter Mines Ltd Australia 1.2
Resources plc
2008 China Metallurgical China Cape Lambert Australia 80 Cape Lambert Iron Australia 400
Construction Group Iron Ore Ltd Ore Deposit
2008 Atlas Iron Ltd Australia n/a 19.9 Warwick Resources Australia 4.3
Limited
2008 American Metals & USA n/a 9.9 Giralia Resources Australia 22.9
Coal International NL
Inc
2008 American Metals & USA Giralia Australia 16.8 Red Hill Iron Ltd Australia 70
Coal International Resources NL
Inc
2007 Territory Resources Australia n/a 0 Matilda Minerals Ltd Australia 2.8
Ltd
2007 Aquila Resources Australia n/a 6.4 Helix Resources Ltd Australia 2.5
Ltd
2007 Murchison Metals Australia n/a 100 Midwest Corp Ltd Australia 987
Ltd
2007 Magnitogorsk Iron Russia Uralruda Russia 51 Bakalskoye Iron Ore Russia 45
and Steel Works Industrial Mines
OJSC Association
2007 Saudi Basic Saudi Sphere Australia 49.9 Guelb el Aouj Iron Mauritania 375
Industries Arabia Investments Ore Deposit
Corporation Ltd
2007 Anshan Iron and China n/a 13 Gindalbie Metals Ltd Australia 54.4
Steel Co
2007 Mitsubishi Corp Japan Murchison Australia 50 Jack Hill Iron Ore Australia 125.6
Metals Ltd Mine
2007 Anshan Iron and China n/a 12.9 Gindalbie Metals Ltd Australia 32.6
Steel Co
2007 Gazprom OJSC Russia Novolipetsk Russia 12 Lebedinsky Iron Ore Russia 360
Iron & Steel Mine
Works
2007 Aricom plc UK Management 50 Kimkanskoye Iron Russia 230
Ore Deposit
2007 Noble Group Ltd Hong n/a 30 Mhag Mineracao Brazil 60
Kong
2007 CVRD Brazil Na 10.1 MBR Brazil 292
2007 Best Decade Ltd China Cape Lambert Australia 70 Cape Lambert Australia 193
Ltd project
 53

2007 Cleveland Cliffs USA MMX Brazil 30 Amapá project Brazil 133
2007 Sumitomo Japan n/a 20 Oresteel RSA 71
Investments
2007 Shougang China n/a 13 Australasian Australia 45
Resources
2007 Qatar Steel Qatar Kuwait Kuwait 25 GIIC Bahrain Na
Company Petroleum
2007 Na Stemcor UK 100 Savage River mine Australia Na
Holdings
2006 CVRD Brazil Public 39.8 CAEMI Brazil 3650
2006 Evrazholding Russia Anglo UK 45 Highveld Steel & RSA 678
American Vanadium
2006 Kuwait Petroleum Kuwait CVRD Brazil 50 GIIC Bahrain 418
2006 Aricom plc UK n/a 100 Kimkanskoye Russia 335
deposit
2006 Citic China Mineralogy Pty Australia 100 Fortesque project Australia 325
Ltd
2006 Mount Gibson Australia Public 100 Aztec Resources Australia 275
2006 Anshan China Gindalbie Australia 50 Karara deposit Australia 169
Metals
2006 Metalloinvest Russia n/a 19.9 Mount Gibson Ltd Australia 74
(Gallagher)
2006 CVRD Brazil n/a 100 Rio Verde Brazil 45
2006 Eurasia Mining UK n/a 100 Fenimak Kavadarci Macedonia 38
2006 Metalloinvest Russia n/a 23 Aztec Resources Australia 23
(Gallagher)
2006 Tschudi Norway n/a 100 Sydvaranger AS Norway 16
2005 Cleveland-Cliffs USA Public 80 Portman Australia 443
2005 Hancock Australia Kumba RSA 50 Hope Downs project Australia 177
Prospecting
2005 Dofasco Canada CAEMI Brazil 33 QCM Canada 162
2005 Stemcor UK Ivanhoe Mines Canada 100 Savage River Australia 21.5
2004 Admirality Australia Hanwell Hong 100 Hanos de el Tofo Chile 1.5
Resources Holdings Kong dep.
2004 Cons. Minerals Australia Reed Australia 100 Mount Finnerty dep. Australia 1.2
Resources
2004 LNM Group UK Zenica Steel B-H 51 Ljubija Iron Mines B-H Na
RMK
2003 Mitsui Japan Bradespar Brazil 15 Valepar Brazil 830
2003 Anglo American UK Public 31 Kumba Resources RSA 465
2003 CVRD Brazil Mitsui Japan 50 CAEMI Brazil 426
2003 Harmony/ARM RSA Anglo UK 34.5 Anglovaal Mining RSA 233
American
2003 Gerdau Brazil Paraibuna Brazil 100 Iron ore deposits Brazil 30
Metais
2003 Cleveland-Cliffs and USA, n/a 100 Eveleth Mining USA 3
Laiwu Steel China
2003 Cleveland-Cliffs USA LTV Steel USA 25 Empire Iron USA 0
Partners.
2003 Cleveland-Cliffs USA Ispat Inland USA 19 Empire Iron USA 0
Partners.
2002 na State of Brazil Brazil 22 CVRD Brazil 1900
2002 Previ Brazil BHP Billiton Australia 2.4 CVRD Brazil 343
2002 Anglo American UK Public 19.6 Kumba Resources RSA 304
2002 Anglo American UK Stimela Mining 10.5 Kumba Resources RSA 152
2002 Anglo American UK Menell family RSA 34.9 Anglovaal Mining RSA 145
2002 Cleveland-Cliffs USA Algoma Steel USA 45 Tilden Iron Partners. USA 17
2002 Granier family Monaco n/a 26 Mount Gibson Australia 5.9
2002 Mount Gibson Australia Kingstream Australia 100 Tallering Peak Australia 2.5
Steel deposit
2001 CVRD Brazil ThyssenKrupp Germany 100 Ferteco Mineracao Brazil 696
2001 Mitsui Japan Frering Brazil 60 Caemi Mineracao Brazil 340
brothers
2001 CVRD Brazil Mitsui Japan 50 Caemi Mineracao Brazil 280
2001 Stimela Mining RSA Anglovaal RSA 11 Iscor RSA 90
 54

2001 Anglovaal Mining RSA IDC RSA 13 Iscor RSA 61

2001 Rio Tinto UK Public 14 Labrador Iron Fund Canada 56
2001 CVRD Brazil Bethlehem USA 5 MBR Brazil 25
Steel
2001 Cleveland-Cliffs USA LTV Steel USA 100 Iron ore assets USA 13
Mining
2001 Ivanhoe Mines Canada Pasminco Ltd Australia 100 Long Plains Mine Australia 1
2000 CVRD Brazil Arbed Luxemb. 63 SAMITRI Brazil 525
2000 Billiton UK Public 2 CVRD Brazil 327
2000 CVRD Brazil n/a 100 Socoimex Brazil 54
2000 Ivanhoe Mines Ltd Canada n/a 100 ABM Mining Australia 29
2000 Portman Ltd Australia Anshan I&S China 40 Koolyanobbing Mine Australia 12
1997 Valepar Brazil State of Brazil Brazil 42 CVRD Brazil 3150
1997 North Broken Hill Australia Bethlehem USA 59 Iron Ore Co of Canada 230
Peko Steel Canada
1997 Caemi Brazil Mitsui Japan 15 MBR Brazil 140
1997 Caemi Brazil Mitsui Japan 25 Quebec Cartier Min. Canada 60
1994 Cleveland-Cliffs USA Cyprus USA 100 Babbit/Silver Bay USA 94
Northshore Mine
Source: Raw Materials Data, 2008.

Several tendencies can be observed:

• The trend among steel companies to integrate backwards from steel production into
iron ore mining was strengthened:
- Fortescue, which calls itself the "New force in iron ore", completed a deal with
Chinese Hunan Valin Iron & Steel Group which will bring the Chinese company's
share of Fortescue up to 17.4 per cent. It is interesting to note that a major
shareholder of Hunan Valin is Arcelor-Mittal. In all Valin will invest some 1.34
billion AUD in Fortesque.
- Severstal completed its acquisition of the Putu Range project in Liberia after a
thorough search of potential targets in India, Latin America and Africa in May
2008.
- Tata Steel group entered into a joint venture with Sodemi, the state owned mining
company of Cote d’Ivoire, to jointly develop the Cote d’Ivoire part of the Nimba
deposit in December 2007.
- The acquisition by Mittal Steel of Arcelor which was pushed through in July 2006 and
formally completed in the end of the year. In this way did Mittal gained not only
considerable steel capacity but also control over the iron ore production facilities
controlled by Dofasco: QCM and a part of the production from the Wabush mine.
- In late 2006 Mittal continued with a deal in Mexico to merge its existing Lázaro
Cárdenas integrated steel plant with neighbouring Mexican long product
SICARTSA, which is also integrated backwards into iron ore mines.
- In February 2007 Qatar Steel (Quasco) acquired a 25 per cent interest in Gulf
Industrial Investment Company (GIIC) which operates a pellet plant in Bahrain.
CVRD had been a 50 per cent owner of GIIC but sold its entire holding in May
2006.
- A month later Quasco together with Saudi Basic Industries Corporation signed a
Memorandum of Understanding with SNIM and the Australian junior Sphere
Investments to jointly develop the Guelb el Aouj pellet project. This deal was
completed in November 2007 when Quasco took 49.9 % in the project for a
consideration of 375 MUSD.
- The London registered Vedanta Resources, which has strong Indian roots, took
over the controlling 51 per cent interest in Indian iron ore exporter Sesa Goa from
Japanese Mitsui for 981 MUSD, one of the largest deals of the year.
 55

• Most Russian iron ore capacity is captive and controlled by Russian owned steel
works. These companies have become more active internationally and retain the
same underlying strategy: to secure a stable flow of iron ore for their expanding
operations, both in Russia and elsewhere. These activities are beginning to result in
major deals:
- Severstal took a 61.5 % stake in the Putu Range project in Liberia from the TSX
and AIM listed junior Mano River and also a 6 % direct holding in Mano River for
a total of 56.5 MUSD.
- In July 2006 the Evraz group together with Credit Suisse took control of South
African Highveld Steel & Vanadium Corp from Anglo American. The joint
venture paid 678 MUSD for slightly less than 50 % with an option to increase to
79 % (all of Anglo’s holding). Highveld is mainly a vanadium producer but it also
delivers roughly 2 Mt of iron ore per year. After pressure from the European
Commission Evraz reportedly divested the mining business of Highveld in early
2008 to the global steel group Duferco.
- The Evraz group also seized full control over the iron ore mining complex
Vysokogorsky GOK in March 2007 through a tender offer for all outstanding
shares.

• In Australia the race to create a third strong producer alongside Rio Tinto and BHP
Billiton has been halted, at least for the time being, as Fortescue managed to start
its operations on schedule and is now firmly established as the only real competitor
to the two majors.
- Murchison Metals proposed a merger with Midwest to stop the Chinese Sinosteel
from taking control over the latter’s iron ore projects in early 2008. It may be an
indication that the battle over the high quality deposits in Western Australia is
intensifying.
- Australian junior Mount Gibson Iron Limited battled to acquire junior colleague
Aztec and succeeded at the end of 2006, thereby combining their projects
Tallering Peak and Koolan Island. Later in December it was announced that the
largest Russian iron ore producer Metalloinvest had taken over 19.9 per cent in
Mount Gibson from Cambrian Mining plc, which was its largest shareholder. At
the same time it was also announced that the Chinese Shougang group had
acquired another 12.2 per cent and hence the two groups together virtually control
the new company. In early 2008 the Russian company wished to withdraw from
the project and tried to sell directly to Shougang. This attempt was however
stopped by regulatory authorities in Australia and the shares were sold to
institutional investors.

• Chinese efforts to reduce dependence on foreign sources of iron ore, partly through
developing domestic resources, partly through acquiring ownership and hence
better control over foreign operations, have been continuing in 2008 but have not
developed as quickly as expected:
- In New Zealand the authorities did not grant permission for Chinese Cheung Kong
Infrastructure Holdings to acquire the export part of the Taharoa iron sand
operations.
- China Metallurgical Group acquired all of Cape Lambert Iron Ore Ltd namesake
project for a total consideration of 400 MAUD in July 2008.
 56

- It is also interesting to note that the first major investment into Chinese iron ore
mining has been made by London Mining which acquired 50 per cent of the
operating Maanshan Xiaonanshan mine in the Anhui province for an intial
investment of 45 MUSD. The deal also includes the Matang project.
- The Chinese major base metal mining company Western Mining acquired 10 % in
FerrAus Ltd in May 2008. In addition to its iron ore deposits in the East Pilbara
region FerrAus also has manganese and nickel/gold resources.

- Sinosteel’s battle to take control over Australian junior Midwest through a 1,400
million Australian Dollars offer in 2008 is the latest but perhaps not last
development in the fight for the Koolanooka-Blue Hills deposit and the Veld
Range iron ore project.

- The Chinese company Best Decade struck a deal with Australian junior Cape
Lambert Iron Ore to acquire 70 per cent of the Cape Lambert project for 250
million Australian Dollars. Best Decade is reportedly the majority owner of steel
manufacturer and trader DeLong Holdings, which is listed in Singapore. The deal
failed later in 2007.

• The interest of iron ore traders in mining manifested itself in a deal in late 2007 in
which Noble Group acquired 30 % of the junior producer Mhag Mineracao in
Brazil. In 2006 the Noble Group of Hong Kong presented a conditional bid for 10
% of Fortescue Metals Group. This bid was however turned down by the
Australians. The Noble Group tried in 2005 to get hold of the Hope Downs project
that was later partly acquired by Rio Tinto. In early 2007 the group successfully
bought into Territory Iron’s Frances Creek project.

• Japanese companies have continued to review their investments in iron ore. On 18

June 2007 it was announced that Mitsubishi had acquired half of the Jack Hill’s
project from its Australian proponent Murchison Metals for 150 MUSD in cash and
later taking large shares of the investment costs. In 2007 Mitsui sold its holding in
Sesa Goa as noted above. The same year Sumitomo took a 20 per cent interest in
South African investment company Oresteel, thereby indirectly earning a 6 per cent
interest in iron ore miner Assmang.

• In the Canadian Arctic the juniors have been gearing up to intensify exploration but
most activities were put on hold in early 2009. In May 2008 Consolidated
Thompson merged with Quinto Mining to acquire its iron ore deposits, which are
located next to the former’s Bloom Lake property. Consolidated Thompson also
tried to acquire the Wabush mine in 2007 but that proposal was turned down by the
owners of the mine. In early 2007 Roche Bay entered into an agreement with
another junior, Advanced Explorations Inc, and its chairman John Gingerich,
previously with Noranda, for the latter to acquire 50 % of the project by financing
most of the exploration and later investment into the proposed mine.

CORPORATE CONTROL

Towards the end of 2008 the merger activity in the iron ore sector declined considerably,
along with activity in the entire mining sector. Corporate concentration declined for the first
 57

time in many years. In spite of the M&A activity in earlier years concentration has grown
mostly through production increases in existing mines and in green field districts. This means
that the major companies have not changed as much as in some other metal mining industries.
Tables 8 and 9 show the 15 and 10 leading iron ore companies in 1990 and 2008 respectively
and it is easily seen that many of the company names are the same. The degree of
consolidation decreased until 2007 mainly because the production by small Chinese and
Indian producers grew faster than that of the industry as a whole, thus increasing their share.
In 2008 the increased production by new Australian miners, including Fortescue, also played
a significant role. Fortescue delivered its first shipments and production reached almost 20
Mt, indicating that the company will reach its set capacity of some 50 Mt in its first full year
of operation in 2009. This is the first new major iron ore producer in several decades and it
managed to place among the 15 largest controlling companies. The top ten producers
controlled only 48.4 per cent of the total world production in 2008, down from a high of 54.4
per cent in 2005. Vale (CVRD) is still at the top and will so remain. Whether it will
strengthen its position in the future depends mostly on how long it maintains its production
cuts. In early 2009 Vale acquired Rio Tinto's Corumba mine and got control over the
expansion potential that Rio Tinto had developed. Rio Tinto has risen to become number two,
mainly by acquiring North in the year 2000, after the latter had swallowed IOC a few years
earlier. Of the top producers, BHP Billiton has experienced the slowest growth in this decade.
Its recent strong increase in production has however almost brought it back to the market
share it held in 1990. Mitsui, which used to be the only Japanese company on the list, left its
top position in 2007 after having disposed of its holdings in India. Most of the traditionally
important domestic European iron ore miners were gone already in 1990. Since then Arbed
has closed its European mines and sold the Brazilian ones. LKAB has fallen down the list but
has more or less kept its production rate constant over the decade. The North American
industry was strongly vertically integrated with complicated joint ventures holding most iron
ore operations. With the disintegration of the steel sector, the situation of many of the iron ore
mines became untenable. Through a long series of deals, Cliffs Natural Resources (previously
Cleveland-Cliffs) has managed to consolidate iron ore production in the United States
without. The Ukrainian group System Capital Management is the only one of the companies
in former Soviet Union that has managed to get into the top 10 list. Ferrominera Orinoco of
Venezuela increased production significantly in 2003/2004 but has since only managed to
keep its production volume constant and hence its share of global production is decreasing.
After a few years of slow developments Kumba increased production at its Sishen mine by
almost 5 Mt in 2008 and moved up the list of top companies.
 58

Table 8. Corporate control in iron ore mining in 1990

Controlling entity Country Controlled Share of Western
production world prod.
(Mt) (%)
1 State of Brazil Brazil 85.44 15.4
2 BHP Ltd Australia 46.20e 8.3
3 Rio Tinto plc UK 42.79 7.7
4 State of India India 32.07e 5.8
5 Caemi Mineracao e Metalurgia SA Brazil 23.03e 4.1
6 State of South Africa South Africa 22.23e 4.0
7 State of Venezuela Venezuela 20.12 3.6
8 State of Sweden Sweden 19.74 3.6
9 State of Luxembourg Luxembourg 18.09e 3.3
10 Iron Ore Company of Canada Canada 14.25e 2.6
11 USX Corp USA 13.54e 2.4
12 Mitsui & Co Ltd Japan 13.44e 2.4
13 Dofasco Inc Canada 12.57e 2.3
14 North Ltd Australia 11.31 2.0
15 LTV Corp USA 11.23e 2.0

Total, 15 largest 386.05 69.5

Total, Western world 555.62 100.0
Total, World 977.00

Notes:
State of Brazil includes Cia Vale do Rio Doce.
State of India includes SAIL, NMDC, Kudremukh and some smaller producers.
State of South Africa includes Iscor.
State of Venezuela includes CVG Ferrominera Orinoco.
State of Sweden includes LKAB.
State of Luxembourg includes Arbed.

Source: Raw Materials Data, Stockholm 2003.

Table 9. Corporate control in iron ore mining in 2008

Controlling entity Country Controlled Share of Total
production world prod.
(Mt) (%)
1 Cia Vale do Rio Doce Brazil 303 17.3
2 Rio Tinto plc UK 150 8.6
3 BHP Billiton Ltd Australia 137 7.8
4 State of India India 54 e 3.1
5 Arcelor Mittal UK 46 e 2.6
6 Metalloinvest Russia 38 e 2.2
7 Anglo American South Africa 36.7 2.1
8 Cliffs Natural Resources USA 32.7 1.9
9 System Capital Management Ukraine 24.5 1.4
10 LKAB (State of Sweden) Sweden 23.9 1.4
Total, 10 largest 846 48.4
Total, World 1746 100.0

Notes:
State of India includes SAIL and NMDC.

Source: Raw Materials Data, Stockholm 2009.

The Arcelor Mittal group (formerly Mittal Steel and before that LNM Group) under Lakshmi
Mittal has managed to build an important and quickly growing global network of iron ore
mines. The group controls iron ore mines in Kazakhstan, the Ukraine, Bosnia, Algeria,
Mexico, Brazil, Canada and the United States. Mittal appears to have chosen a strategy
similar to that of the Russian steelworks, trying to secure a stable supply of iron ore through
direct ownership. In late 2005 it was announced that the Liberian Nimba iron ore district,
where Swedish Lamco was operating from the mid 1960s to the late 1980s, was to be
redeveloped by Mittal. In Senegal, Mittal’s plans to invest in the Faleme deposit owned by
 59

government controlled Miferso, have put the company on a collision course with Kumba,
which is also claiming rights to the project. If the quantities of ore that Mittal has contracted
in South Africa and the United States are added, Mittal's total captive amount of ore reached
some 65 Mt in 2008. There are several capacity additions in the pipeline, including recently
announced additions to the Andrade mine in Minas Gerais, Brazil, which is owned by Arcelor
Mittal but leased to Vale, amounting to as much as 55 Mt according to Arcelor Mittal sources,
and by 2012 the total capacity should be over 110 Mt according to present plans. If all these
plans are realized, the self-sufficiency of Arcelor Mittal would reach 75-85 per cent for iron
ore in 2014/15.

The vertical integration in the global iron ore and steel sector has been declining in the market
economies over the last 20 years but a new trend has been noticeable during the last few
years. As discussed above, steel companies in Europe and North America have withdrawn
from mining and the mining companies have consolidated. With the restructuring of the
Russian and Ukrainian industries a new strong tendency towards more direct links between
mines and steelworks has emerged. Other new and dynamic steel producers, with their origin
mostly in emerging markets, have chosen the same strategy: Mittal Steel and Global Steel
Holdings (controlled by Lakshmi Mittal’s younger brother Pramod who chairs the Indian
Ispat group), are but two examples. Moreover, with the integration of the Chinese iron and
steel sector into the world economy, another group of vertically integrated companies has
been introduced. Globally, in mid 2008 20 % of total iron ore production was estimated to be
controlled by the steel industry. The figure is slightly lower than in 2007 due to the fast
increase in production in Australia and South Africa. It is most probably an underestimate
since it includes only the minor part of the Chinese iron ore production that has been possible
to identify as controlled by steel companies. In fact, a large part of the medium and small iron
ore operations is probably also controlled by local steelworks. Steel companies in the
traditional market economies (including developing countries) control 12 %, companies in the
CIS countries 5 %, and major Chinese steel companies control some 3 %.

The Chinese iron ore sector is much more fragmented than that of any other country. Since
there is important vertical integration between steel works and iron ore mines, some
consolidation takes place when steel companies merge, but so far the results are modest and
only two Chinese companies make it into the top 25 companies in the world. Anshan Iron &
Steel Corporation, which is the largest Chinese iron ore mining company, ranks as number 15
in the world in 2008. Its holdings include the well-known Gongchangling mines and six other
affiliated mines. Its production in 2008 increased after a temporary decline in 2007 and
reached some 17 Mt. The second largest iron ore company in China is Shougang with a
controlled production of 13.5 Mt up from 12.7 in 2007 (rank 20 in 2008). Shougang's most
important mine is the Marcona operation in Peru.

After the price rise in recent years Chinese steelworks are anxious to have more influence
over price formation in the iron ore industry, in addition to a stable and secure supply of iron
ore and other steel making raw materials. So far, Chinese direct investment in iron ore mines
has been limited and Chinese buyers have mostly focused on securing stable supplies through
long term contracts. But it is clear that corporate control is a key interest and that major
Chinese acquisitions and financing of new mines through equity stakes will take place in the
future. The focus is likely to remain on iron ore and copper mining.

To measure corporate control at the production stage underestimates the concentration of the
iron ore sector since large parts of total production do not enter the market but are produced in
 60

captive mines or mines which have a protected or restricted market. An alternative way to
measure the control is to monitor the share of global seaborne trade of the leading companies.
Estimates calculated by RMG are shown in table 10 (the total figure for seaborne trade in the
table is lower than that quoted in chapter I, because the figure here has been calculated from
export data while the one quoted in chapter I refers to actual shipments; the use of differently
structured sources give rise to differences in periodicity, the results of which were probably
particularly important in 2008). Measured this way, the shares of the major companies are
considerably higher. Vale alone controls 33 % of the total world market for seaborne iron ore
and the three largest companies control 69 %. The share of Vale, the largest exporter, has
declined in 2008 as has its share of total world production. But as BHP Billiton increased its
share of exports, the share controlled by the Big Three was constant at 69 per cent. As it has
been difficult to track the flows of ore from the smaller Indian producers it is possible that the
exports of Sesa Goa, earlier controlled by Mitsui and from 2007 by Vedanta, should have
been included in the list with a production of some 17-18 million tonnes of which most is
exported. Its inclusion would however not have changed the conclusions in any significant
way. The Herfindahl-Hirschmann Index (HHI) is 1736 at the level of the 10 largest
companies (to add smaller producers would not increase the index to any significant degree).
This is slightly lower than the 2007 figure and is just below the 1800 limit for what the United
States Federal Trade Commission calls “highly concentrated” and it lends support to the
argument that major producers have a potential influence over the market and prices. The
proposed merger between BHP Billiton and Rio Tinto would have raised this level further and
the HHI figure would have increased to almost 2 500. From this point of view it was logical
for the proposed merger not to have been approved by regulatory authorities in the European
Union unless the companies made some divestitures. It remains to be seen if the anti-trust
authorities in any of the countries concerned will have any objections to the proposed
production cooperation between Rio Tinto and BHP Billiton. It would not be surprising if
some critical comments were made.

Table 10. Corporate control in seaborne trade of iron ore

Controlling entity Country Controlled share of total
seaborne trade
(%)
2008 2007 2006

1 Cia Vale do Rio Doce Brazil 32.8 36.1 36.1

2 Rio Tinto UK 18.6 19.3 19.0
3 BHP Billiton UK/Australia 17.1 13.8 14.2
4 Kumba Resources South Africa 3.1 4.0 3.8
5 Fortesque Australia 2.4 na na
6 LKAB Sweden 2.2 2.6 2.7
7 SNIM Mauritania 1.4 1.6 1.6
8 Hierro Peru Peru 0.9 1.0 1.0
9 CAP Chile 0.7 0.9 0.9
10 CVG Ferrominera Venezuela 0.7 0.8 0.8
Others various 20.2 19.9 19.9

Total seaborne trade 805 Mt 100.0 745 Mt 100.0 685 Mt 100.0

Source: Raw Materials Group 2009.

STATE OWNERSHIP

The iron ore sector is the last in the global mining industry where state owned entities still
play an important role. In India, the state owned group of companies includes those controlled
at the national (NMDC and indirectly SAIL) and regional levels (Orissa MDC). In early 2006
 61

the Indian Government announced that a sale of a 15 per cent stake in NMDC could take
place. NMDC is almost wholly owned by government but a small portion of the company is
privately held. This first privatisation attempt has however not yet been completed. In
Sweden, LKAB has managed to stay competitive while going deeper underground, by
complete and remote controlled mechanisation and by moving into higher value pellets
production. The Venezuelan and Mauritanian producers also remain under government
control. They have gradually lost market shares but have managed to survive as alternative
sources of supply. In Iran, the government controls important iron ore production. It has been
rumoured that Iran intends to organise an initial public offering for its two steel works
Mobarakeh Steel and Esfahan Steel. Nothing has however been said about what will happen
to the state controlled iron ore mines. CVRD (now Vale) was privatised amongst considerable
national protest, while the privatisation of South African Iscor went more smoothly. With the
privatisation in the Ukraine and Russia completed, the overall level of state control has
decreased considerably since the early 2000s. In Algeria, the government has announced its
intention to sell its remaining ownership in the iron ore operations already jointly owned with
Mittal. Most of the large scale Chinese iron ore production is still in central government
hands. Anshan Iron & Steel is the largest iron ore producer in China with 17 Mt in 2008.

In 1990, more than two thirds of the world's ten largest companies’ production was controlled
by the six state owned companies in the group. In 2008, the comparable figure was less than
10 %, and the number of state owned entities in the Top 10 list had decreased to three: SAIL
and NMDC in India and LKAB in Sweden. Ferrominera in Venezuela dropped out in 2008.
State companies operating in Algeria, China, Egypt, India, Iran, Democratic Republic of
Korea Mauritania, Peru, Sweden, Tunisia, Turkey, Venezuela and Vietnam control almost 13
per cent of total world production of iron ore. It is quite possible, given the present increasing
concern about security of supply that this figure will start increasing again in the future.
Security of supply concerns could very well lead to renewed calls for nationalisation of
mineral assets, particularly for iron ore and copper which are of special economic importance.
 62

V. PROJECT REVIEW

During 2008 new iron ore projects with a total investment amount of some 27 billion USD
were presented. Iron ore is now the second most interesting metal for development. In 2007
iron ore surpassed nickel and gold with a total investment of 70 billion USD or 23 % of the
total project pipeline. With a total investment of 106 billion USD or 26 % the total project
pipeline iron ore is second only to copper with 118 billion USD in 2008. For several years
iron ore was under-represented in the project pipeline. When the prices started rising and
demand increased the situation was reversed and during the last couple of years iron ore has
become more and more important. In 2002, iron ore projects accounted for 4 % of the total
amount of investment dollars planned for new mines globally. In 2003 the figure had almost
doubled to reach 7 % and that trend continued when in 2004 the share of investment doubled
again to 14 %. Since then the growth has flattened, the figure in 2005 was 18 % and 2006 it
reached 17 %. For 2007 there was another increase and it reached 23 %. The total amount of
project dollars in the pipeline also increased during these years and this development has
continued unabated through to 2008. In absolute terms there were 3 billion USD earmarked
for iron ore developments in 2002, 14 billion in 2004, 25 billion in 2005, in 2006 34 billion
and some 70 billion in 2007.

New iron ore mining capacity taken into operation in 2008, as identified at the individual
project level, reached around 90 Mt globally. This is a considerably lower figure than in 2007
when some 130 Mt of new capacity was recorded. The year preceding that saw some 70
million tonnes of added capacity and prior to that only 30-40 Mt was reported. These figures
include known brown field 8expansion) projects. However the figures for both years exclude
many small, locally owned projects, mostly in China and India but also a few in Brazil, which
are not announced in the same way as a project run by a listed company. Neither do the
figures include incremental capacity increases in existing mines, such as de-bottlenecking or
capacity increases due to reorganisation, which are sometimes called "capacity creep”. The
“creep” is difficult to monitor and impossible to predict. It can only be inferred at the end of
the year when the production increases by more than the sum of all new projects. In contrast
to the highly publicized green field projects, many brown field expansion projects pass
unnoticed until they come into operation. All of the incremental, half a million or one million
ton iron ore projects add up to considerable tonnages, however. The driving forces for
refilling the pipeline with new projects have increased considerably in the years of high
prices. The coming years will see a lower amount of projects announced but there are still a
lot of projects in the pipeline.

In 2007 the total potential new iron ore output in the pipeline increased sharply. In 2008
however there was a definite end to the mining boom. The period of strong demand growth
has lasted longer than anybody expected in the beginning of the mining boom and the first
round of new projects, together with all brown field projects that had been started, was not
sufficient to keep up with the growing demand. The big three producers soon realised that if
they did not continue to increase production of iron ore they would have to compete on a new
iron ore market where there might be a fourth and even a fifth big player. With Fortescue
coming on stream the big three could now very well be on their way to become the big four.
This development, together with the increases in iron ore prices in 2008, created a
determination to go ahead with some of the more long term projects in West Africa and a
faster than planned expansion in Brazil and Australia. Projects in the Canadian Arctic have
also come a long way since the idea of mining iron ore in the north of Canada was first
 63

proposed. When the end of the mining boom came, it came rather suddenly, and a lot of the
early stage projects will probably be idle for the next couple of years. Only those projects that
are actually competitive will go on to become mines.

Vale (CVRD) has taken considerable steps to remain the largest producer. Among its projects
are expansions in Carajás, first by 10 Mt in 2009 and later an expansion of 30 Mt by 2011.
Serra Sul with an addition of 90 Mt to be ready in 2013 is still subject to approval by the
board of directors. Apolo is a 24 Mt/a project, also to be finalized in 2013. The combined cost
of these projects is roughly 16.6 billion USD. If all Vale’s projects revolving around iron ore,
including infrastructure capacity increases and pellet plants, are added together, Vale plans to
spend around 20 billion USD. These projects are all part of Vale's plan to compete with local
Chinese producers by increasing output and possibly producing pellets directly on the Chinese
market. The ore will be transported by new, very large ore carriers with long term shipping
contracts to avoid the volatility of freight charges. In China the ore will be distributed by
Vale. Vale has also decided to enter the coal business on a massive scale, aiming at 30 Mt
production in 2010. The first step was taken in March 2007 when a 662 MUSD acquisition of
AMCI Holdings, an Australian coal producer, was completed. In this way Vale will be able,
like Rio Tinto and BHP Billiton, to supply both major inputs for steel making. At present
there are two coal projects with a combined value of 1.6 billion USD.

Rio Tinto completed several iron ore projects during 2007. In 2008 the company stated that it
expects a doubling of world demand for its metals and minerals by 2022. Current iron ore
projects in Australia includes Hope Downs, Mesa A and Brockman 4 mine developments.

On 4 February 2008 BHP Billiton announced approval of 1,094 million USD of capital
expenditure to accelerate the growth of its iron ore operations in Western Australia. This
investment, the Rapid Growth Project (RGP) 5, is expected to increase capacity to more than
200 Mt during 2011. The actual capacity increase is 50 Mt/a. At present some 50 % of the
engineering is complete and construction activities have commenced. BHP Billiton’s long
term plan is to increase iron ore capacity to more than 300 Mt, but there are already plans to
increase the capacity of Port Hedland, the export port, to over 350 Mt. In the last quarter of
2008 BHP Billiton delivered RGP 3 which expanded the capacity at Area C by 20 Mt. RGP 4
is on track, Engineering is over 95 % complete and construction is nearing 80 % complete.
RGP 4 will increase installed capacity by 26 Mt to approximately 155 Mt in the first half of
2010.

The plans of the “Big Three” are regularly upgraded but because of bottlenecks, particularly
in Western Australia but also in the rest of the world, it is becoming more and more difficult
even for these large companies to contain costs and keep time schedules. There has been a
lack of trained and experienced staff of all types, from project managers and construction
workers to build the new mines and the necessary infrastructure, to geologists and mining
engineers. Delivery times for key pieces of equipment have doubled or trebled during the last
couple of years. For example, grinding mills, which used to be shipped within a year and a
half, could require almost four years from order to delivery. With the falling market and
increasing uncertainty in the industry a lot of projects will be postponed, stretched out or
slimmed down. This means that not as many trained staff will be needed and the equipment
that a year ago was urgent can now wait, maybe until the next iron ore boom.

On 15 May 2008 Fortescue (FMG) began loading its first commercial shipment of iron ore at
Port Hedland for delivery to Baosteel in China. This means that Australia now has a third
 64

force in iron ore mining after Rio Tinto and BHP Billiton. Most other Australian projects are
at an early stage or considerably smaller. FMGs immediate focus now is cost control,
ensuring production at the planned 55 Mt/a level and looking into the expansion program.
FMG’s plans for expansion are set on ramping up capacity from today’s 55 Mt/a, to 75 Mt/a,
to 95 Mt/a and then 155 Mt/a. This involves expanding the Chichester range and putting the
Firetail, Investigator, Solmon East and Serenity resources into production. According to the
company, this could be done within a period of about 4-5 years.

The trend to de-link iron ore mining from steel production, which was strong during the 1990s
and early 2000s, had not even been completed before a reverse trend could be observed. A
captive iron ore mine is now seen by some companies as a hedge against continued future
price increases. Arcelor Mittal is leading this new development, having over a number of
years acquired steel companies with access to iron ore, either through direct ownership such
as: Inland Steel in the US with Minorca mine and the former state owned El Hadjar steel
complex with the two mines Boukhadra and Ouenza in Algeria and more recently its Mexican
and Bosnian acquisitions; or with other long term, contractual arrangements as in the case of
former Iscor South Africa, now Mittal South Africa, which has a long term agreement with
Kumba to deliver iron ore at a favourable cost plus basis. Other steel works are following
Mittal’s example, including Essar Steel in India and several Chinese and Russian steel
companies. Chilean steel producer CAP has even taken the consequences of the iron ore
boom as far as discussing to make iron ore its core business and putting steel in the back seat.
How this trend will develop during times of falling iron ore prices is hard to say but when iron
ore becomes easily available the trend might slow down. Indian and Russian companies will
however probably follow through with their plans for more self reliance on iron ore.

Progress in Canada has been rather slow during the last couple of years, not surprising
considering that most new projects are to be found in the Canadian Arctic. During the last
year, expansion plans were presented also for Carol iron ore mines. But in 2009 all expansion
plans for Carol iron ore mines were postponed because of the current financial situation.

In South Africa, Kumba Iron Ore (Kumba) has been trouble ridden during the last couple of
years with for example the dispute of the Falémé project in Senegal. These times now seems
to be over and the company has set increased production as a goal. By 2016 Kumba has stated
that it will have a capacity to produce 150 Mt/a and obtain a 13 % share of the total seaborne
market for iron ore. This is more than double today’s capacity and will be achieved by
realising the full potential of the Northern Cape Province in South Africa. The company also
has access to opportunities in West Africa. The expansion in the Northern Cape is dependent
on what is called the Sishen-Saldanha export channel which is the railway connecting the
Sishen mine with the Saldanha port. In 2005 Kumba and Transnet concluded a deal to
increase the amount of iron ore that Kumba could transport on the railway line. This increase
to 35 Mt/a will be reached in 2009. Further increases of the capacity of the railway are
underway. In Kumba's project pipeline are several both expansions and new mines planned.
The Sishen expansion project is underway with the construction phase almost complete and
full operation expected in 2009. The Sishen South project was first envisaged as a 3 Mt/a new
mine, but was changed to a 9 Mt/a mine, a feasibility study is completed and an investment
decision was taken in July of 2008. The mine will cost 8.5 billion South African Rand,
production will commence in 2012 and full capacity will be reached in 2013.

Assmang is the other large producer of iron ore in South Africa. As its Beeshoek mine is
reaching the end of its economic life, Assmang has taken steps to open the Khumani iron ore
 65

mine. The construction of the mine is now complete and full production will be reached by
2010. In May 2008 a pre-feasibility study on the expansion of the mine was completed. A
feasibility study are underway and is planned to be ready by the second quarter of 2009. Total
cost of the project would be 7.3 billion rand it would add 8 Mt/a to today’s 8 Mt/a to make the
total capacity of the mine 16 Mt/a.

Elsewhere in Africa, there are a few large projects in early stages. Some of these are probably
years from completion but may contribute to making Africa more important as an iron ore
producing region. Arcelor Mittal has taken an interest in the continent and is in the process of
developing three different projects: Falémé in Senegal, El Agareb in Mauritania and Yekepa
in Liberia. The Mbalam project is controlled by Sundance resources. In Liberia the Bong Iron
Ore Mine is to be reopened by a Chinese company. Rio Tinto with its Simandou project in
Guinea is looking into a mine that will potentially produce 70 – 170 Mt per year. In 2007 Rio
Tinto approved 145 million USD for a pre-feasibility study focusing on the development of an
iron ore mine, a 700 kilometre rail system and a deep water port. A decision on mine
development is expected in 2010 and production is anticipated to begin in 2013 with potential
for future expansion. However in August 2008 Rio Tinto received correspondence from the
Guinean Minister of Mines that informed the company of a compulsory relinquishment of the
northern part of the Simandou mining concession whilst confirming Rio Tinto’s right to the
southern part.

In Bolivia, the Indian steel company Jindal Steel & Power ltd won the tender to develop El
Mutun in mid 2006. El Mutun is believed to be one of the world's largest iron ore deposits and
Jindal Steel & Power ltd has proposed to spend 2.1 billion USD over the next eight years to
develop a 10Mt pellet plant, a 6Mt DRI plant, a 1.7 Mt steel plant and a power plant. But the
infrastructural and technical problems at El Mutun are formidable: The deposit straddles the
border to Brazil, the distance to the Atlantic Ocean is almost 2,000 kilometres and just to get
to the Paraguay River it is necessary to build a railway through the swamps surrounding the
Mutun area. Finally, the size of the ore resources has been questioned and the type of ore in
the deposit is not easily processed using existing technologies.

Mongolia is attracting increasing attention. With iron ore prices rising, Chinese companies
have been looking outside their borders for new deposits. In 2004 Tumurtei Iron Ore Co. Ltd,
a joint venture between the three Chinese companies Helongjiang, Quinglong and Shougang
and a Mongolian company, started construction of an iron ore mine with proven reserves of
230 Mt; design output of the mine is 4 Mt. During the last years a small amount of iron ore
has been imported into China from Mongolia and in 2008 this figure rose to 1 Mt. This might
suggest that some of the plans of opening mines in Mongolia have in fact taken form and
materialized.

China has been putting more funds into prospecting for new iron ore deposits during the last
couple of years. In 2006 585 million RMB was spent looking for new iron ore resources
which resulted in an extra 2.1 billion tons proven iron ore resources. The total number of iron
ore projects for 2007 was 1145, of which 786 were new and 290 were put into operation. This
actually represents a slight decrease in both the number of projects under construction and
new projects. Although the availability of this type of information is uneven, the constant
stream of news proclaiming that additional resources has been found in connection to existing
mines or in new areas suggests that this trend is continuing and that the Chinese government
is spending money mapping out the resource potential of the countryside.
 66

In 2008 the production of iron ore was 824 Mt (not recalculated to account for the lower iron
ore content). For 2009 there have been predictions that the total iron ore demand will fall but
that domestic output will increase slightly to reach 860 – 880 Mt. With falling prices and
lower freight rates, foreign iron ore producers have an advantage, however, and in early 2009
many Chinese iron ore mines were closed.

Information on iron ore projects in China can be sparse and far between. Most projects are not
reported at all and new capacity can come on stream without much publicity. That is also the
reason why most of these capacity increases are not included in table 11, where only clearly
identified projects are shown.

To cope with the huge demand for raw materials, some local governments have opened up
prospecting and mining rights to domestic and overseas ventures, for example in Xinjiang
autonomous region. The total estimated iron ore resources in Xinjiang are presently around
7,782 million tons, while the proven iron ore reserves are 734 Mt. Most likely the eastern part
of Tianshan Mountains will be the target area for iron ore prospecting in the future. The
estimated reserves there are 2,389 million tons, but according to industry experts these figures
are sourced from statistics from 2002. The actual reserves could far exceed the published
figure.

In early 2009 Baosteel Group announced that it had come to an agreement with the Xinjiang
Hetian government to start exploring and mining the province.

The solid growth in Chinese iron ore mining continues, in spite of limited resources of quality
ore with high grades of iron. A list of projects, most of them with a capacity increase of more
than 1-2 million tonnes, which are coordinated or at least known to central authorities, is
given below. Only some of them are listed in Table 11 since no further details are known:

• Luzhong iron ore deposit in Anhui province.

• Yichang high-phosphorus iron ore project of Shougang Steel
• Dadong mine of Dunhua Dadong Mining Co Ltd
• Hainan iron ore mine of Hainan Iron and Steel Co Ltd
• Danhongshan iron mine of Kunming Steel
• Panzhihua-Xichang iron ore deposit of Chongqing Steel
• Enshi iron ore project of Wuhan Steel
• Xingjiang iron deposit Baosteel Group and Bayi Steel

This list provides circumstantial evidence that the Chinese expansion of capacity is capable of
increasing iron ore production at a higher rate than is generally expected. The continuing
underestimation of the Chinese pace of expansion has been one of the key problems of our
forecast for production capacities during the past years. Given the difficulties in monitoring
Chinese new projects, including those that are operated by major companies, not to mention
all the small projects, it is our conclusion that most likely there will be flaws in the forecasts
of Chinese production yet again in 2009. In today’s lower price environment mines will
probably shut down as fast as they opened up during the last couple of years and make the
forecast as problematic but reversed. But there is no rational way of handling the issue other
than listing the known projects and taking into account the evolution of production in China
by month.
 67

The Chinese so-called “Two Ways Strategy” is firmly in place, with expanded domestic
investment into exploration and production capacity constituting one strategy leg and imports
and foreign direct investment the other. In 2001 the Chinese government formulated a
directive for Chinese companies to seek long-term access to natural resources outside of
China. This directive is followed up by various forms of financial aid to companies. During
2007, Chinese direct investment abroad has increased and more Chinese foreign investment is
expected in the next couple of years. In addition to the numerous investments in Australian
projects, Chinese companies have also started to invest in Africa and South America. The
Belinga project in Gabon operated by China National Machinery & Equipment Import &
Export Co and the acquisition of the Sierra Grande project in Argentina are just two
examples. On 7 January 2009 the Government of China released the National Plans for
Mineral Resources 2008 – 2015. The plan states that iron ore, as part of several minerals and
metals of which demand is on the rise in the country, is an encouraged sort of ore which, it is
suggested, should receive supporting measures to enhance supply capability.

The integration of China, Russia, Ukraine and Kazakhstan into the global iron ore market is
noticed also in the growing number of projects announced in these areas. But these areas may
have high costs and the list of new projects in these countries could be cut more than in other
countries. Nevertheless, these countries certainly have the potential and capacity will grow
when the financial situation and iron ore markets improve. Projects in the former centrally
planned economies are often more long term than in market economy countries and there is a
tendency to complete all the investment before production starts even if this delays production
start by several years. This way of operating is a legacy from the times of central planning
when capital investment was not an issue (or cost) for the operating companies.

Russian, Ukrainian and Kazakhstani iron ore producers have expanded capacity in recent
years. This was mostly done without any major investments. But in the last couple of years
Russian producers have come to the end of this expansion period. In Ukraine the most
important projects coming on stream are brown field projects and this suggests that the iron
ore mining industry in Ukraine still has some way to go before the need for new deposits
arise.

It is difficult to obtain clear-cut information about new projects in India. The number of
projects – green field and expansions, within the privately held and the state owned sector,
and by emerging and existing small producers - is growing fast. More capacity is expected to
come on stream than is listed in table 12. Foreign investors, including Rio Tinto, BHP Billiton
and Mitsui, and also Chinese and Korean companies, have had exploration projects running in
India, often for several years, although little is known about the progress made. Privately
owned Indian steel works are also developing projects to secure their growing internal
demands. Projections for expansions presented by Indian industry leaders indicate that iron
ore production must reach 290 Mt by 2020 to meet domestic steel demand estimated at 180
Mt annually. If exports are to be continued at the current 100 Mt level additional production
capacity of 180 Mt on top of the 214 Mt produced in 2008 will become necessary. According
to the Ministry of Steel in India, iron ore demand is set to rise to 130 Mt in the fiscal year
2011/2012. This would mean a need of 230 Mt of iron ore if exports stay the same. However,
the ministry is anticipating a decrease in the iron ore content so the actual iron ore needed
would be more than 230 Mt.
 68

The potential in India includes:

• Bellary Hospect Region:

Capacity of 2007 was 14 Mt/a, which can be increased to 25 Mt/a by consolidating
leases and developing new deposits.
• Eastern Region:
Capacity in 2007 was 27 Mt/a, and proposed increases should take it to 45 Mt/a by
2008/2009 and 70 Mt/a by 2011/2012.
• Bailadila Region:
Capacity 2007 was 17 Mt, which could be increased fairly quickly to 26-27 Mt.
• Goa – Redi Region:
Capacity in 2007 was 20 Mt/a, and consolidation in this region could increase the
number to 25 Mt/a.
• Karnataka Region:
There are some 800 Mt of deposits in the region; if environmental problems can be
overcome this could be an important iron ore producing region.

Historically, bottlenecks in the transport systems, both railways and ports, have been major
stumbling blocks for increasing Indian iron ore exports. Federal and state governments have
however tried to support the growth of the iron ore industry, first, by speeding up license and
permitting procedures, and second, by vowing to spend as much as 25 billion dollars on
upgrading ports and transport links to the coast. These measures could make it possible for
Indian iron ore production and exports to grow much faster. Although reports of progress in
India are often less than comprehensive, it is clear that the iron ore expansion moves ahead
continuously. The export tax introduced in early 2007 may act as a brake on some of the
projects planned in India. In February 2008 the government investigated the possibility to
further increase this tax but by March the proposition was put on ice and the tax stayed at a
low level. Later, the tax on lump ore was raised to 15 % and stayed at that level until
December. In June 2009, the Ministry of Steel proposed that the tax be raised to 15 % again,
this time on both lumps and fines. The stated purpose is to protect the domestic steel
industry’s access to raw materials.

The “Big Three” will face increased competition in the medium to long term, but this
competition is not likely to come from complete newcomers to the industry. The magnitude of
an investment into iron ore is larger than in any other metal: Gold projects are often smaller
than copper projects, and although the average gold project has grown to 165 MUSD
compared to 130 million one year ago, they are still much smaller than the +480 MUSD
average project size for copper. The average iron ore project is even bigger than a copper
project, well above 670 MUSD compared with 500 MUSD in 2007. This makes it difficult for
companies without large financial resources to enter the sector. Iron ore projects are often
burdened with investments in transport infrastructure, often constituting the major part of the
investment cost. The on-going battle fought in and out of courts concerning the rights to use
the existing railway systems in Western Australia is but one good example of the importance
of the infrastructure. Therefore, in addition to financial strength, considerably bolstered by the
previous year’s large price increases, the established major producers have advantages that
lower their marginal costs of expansion. First, they are able to expand existing operations,
often through relatively minor additional investments in upgrading their transport systems.
Second, they can open up new deposits close to existing mines, thus reducing the cost by
expanding already existing process plants. With falling prices to be expected those who will
 69

be hit the hardest are the newcomers, those who started production in the last one to three
years when prices was high and rising.

In addition, it is more difficult to market an iron ore product than a comparable copper or base
metal concentrate, not to mention a gold doré bar. Iron ore is a much more heterogeneous
product and there is no metal exchange that can function as a market of last resort. A new
producer has to sell directly to a consumer and convince the potential customer that the
product will be of consistent quality over a long period of time and that it will be delivered
regularly. Accordingly, any completely new producers are likely to meet with major
difficulties in entering the market. Instead, more serious competition may come from
established second tier producers, particularly in countries where the transport situation is
similar to that of the dominating companies. Iron ore and steel companies in China, Russia
and India thus have a relatively advantageous situation. These countries are more or less
closed to investment by foreign companies even if the situation in India at present is unclear.
Exploration projects are underway by for example Rio Tinto. A possible advantage of new
and small iron ore producers is the presumed willingness of steel mills to contract part of their
iron ore demands to them to counter the growing market power of the “Big Three”. Long term
contracts are on the other hand usually a precondition for the ability of the potential new
producer to raise capital.

The number of projects in the pipeline and the volumes to be produced have increased in spite
of several large projects having been completed during 2007. There is a constant flow of new
projects announced all over the world by juniors. In table 12 we have grouped the projects
into three categories: Certain, Probable and Possible, according to our judgement of the
probability that they will get going and start producing iron ore at the planned time. Some
projects have been announced so recently that we have not been able to make a thorough
assessment or data are simply not available. These projects have no probability indication. For
projects without any future capacity figure known to us, we have not been able to gauge their
chance of materialising and no probability measure is given.

In Brazil the situation has changed for the smaller producers from our last report. CSN has
traditionally been forced to give preference to Vale when selling its surplus iron ore. After a
court ruling this situation has changed and CSN is now able to export iron ore by itself. It has
signed a deal to supply Bahrain based Gulf Industrial Investment Co with iron ore and is
looking into expanding the casa de Pedra mine. In a few years CSN might be an iron ore
mining company as well as a steel company. The court ruling also gives room for other
players to mine in Brazil and to export without having to go through Vale. This might turn
into a situation closely resembling the situation in China and India where a large number of
smaller producers can easily change their levels of output depending on the demand of the
international market.

It must also be mentioned that iron ore mines become depleted or are closed down for other
reasons. Even if the number of closures has been negligible during the last couple of years the
case of KIOCL in India not being given continued environmental approval for its operations
in a protected area is a good example of capacity being withdrawn from the market. Another
good example is the Beeshoek mine in South Africa. The mine is shortly reaching the end of
its economic life but the owner has already started up a new mine to compensate for the
capacity loss. In coming years more capacity will disappear.
 70

The total project pipeline contains more than 430 Mt of new production capacity to come on
stream between 2009 and 2011. Of this total, around 172 Mt falls into the category “certain”,
54 Mt “probable” and 204 Mt “possible”. Looking at the geographical distribution of the
projects presented in table 12 it is seen that 34 % of the projects are to be found in Oceania,
16 % in South America and 13 % in Europe, while the rest are more or less evenly distributed
over the remaining continents. However, 73 % of the projects labelled as certain can be found
in Oceania. South America has 6.9 % of the certain projects and Africa accounts for 7.5 % of
the certain projects. While West Africa is making a reappearance as a potential iron ore
producer the only project labelled certain is in South Africa.

Most of the expansion is expected to take place in Australia and South America, mainly in
Brazil but also in Mexico and Peru. There are several South American projects in the
“probable” and “possible” category. This reflects a certain degree of uncertainty with respect
to some new projects. In general only a few of the “probable” projects will become a mine in
the period stated by the company handling the project and almost no “possible” projects will
make it on time. This does not mean that they will not one day become a mine but only that
few such projects will be realised over the coming years.

In the period after 2011, more than 300 Mt of additional iron ore capacity is listed with a
completion date. Given the present circumstances many of the projects in the pipeline will not
be taken forward if the iron ore market does not turn around and continues to expand and that
others might not get the financing they need.
 Table 11. Completed iron ore projects since May 2008

Expected Project
Name Country World region Status Controlled by annual ore cost
prod (Mt) M USD
Africa
South
Khumani Iron Ore Mine Africa Africa Completed ARM, AssOre 8.4 883.8

Asia
Tumurtei Iron Ore Mine Mongolia Asia Completed Tumurtei Iron Ore Co. Ltd 4

Americas
Amapa Brazil Latin America Completed Anglo American 6.5 273
Sudeste (MMX) Iron Ore Mine Brazil Latin America Completed EBX Group 8.7
Vargem Grande Iron Ore Mines Brazil Latin America Completed Vale na 462
Volcan Iron Ore Deposit Mexico Latin America Completed Arcelor Mittal 2 64

Oceania
Whyalla (Middleback Range) Iron Ore Mine Australia Oceania Completed OneSteel 0 321.5
Cloudbreak/ Christmas creek Australia Oceania Completed Fortescue 55
Pardoo Australia Oceania Completed Atlas Iron 3

Source: Raw Materials Data. Mines & Projects,

2009.
 Table 12. Ongoing and announced iron ore projects
Project *Expected
Project
Name Country Status Controlled by cost annual ore Completion
completed
MUSD prod (Mt)
Africa
Gara Djebilet Iron Ore Deposit Algeria Prefeasibility

Loumbou-Loumbou Iron Ore Deposit Benin Conceptual State of Benin

Topa Iron Ore Deposit C African Republ Conceptual Adryx

Mbalam Iron Ore Deposit Cameroon Conceptual Sundance Res 3277 2012 35.0
Kribi Iron Ore Deposit Cameroon Conceptual State of Cameroon

Mayoko Iron Ore Deposit Congo (Brazzav) Conceptual DMC Mining 486

Mount Nimba Côte d'Ivoire Conceptual Tata Steel

Belinga Iron Ore Deposit Gabon Conceptual Chinese Consortium 3000 30.0

Simandou Iron Ore Deposit Guinea Prefeasibility Rio Tinto plc 6000 2013 70.0
EuroNimba (BHP,
Nimba Iron Ore Deposit Guinea Feasibility Newmont) 300

Mount Nimba Iron Ore Mine Liberia Susp, restart/plans State of Liberia 949.1 2008 13.0 po
Closed,
Bong Iron Ore Mine Liberia reopen/plans China Union 2600

Putu Range Iron Ore Deposit Liberia Conceptual Severstal, Mano River 30
Wologizi Range Iron Ore Deposit Liberia Conceptual State of Liberia
Yekepa Iron Ore Mine Liberia Susp, restart/plans Arcelor Mittal 1500 2009-2012 15.0
 Table 12. Ongoing and announced iron ore projects
Project *Expected
Project
Name Country Status Controlled by cost annual ore Completion
completed
MUSD prod (Mt)
Africa
Wadi Shatti Iron Ore Deposit Libya Conceptual State of Libya

Soalala Iron Ore Deposit Madagascar Conceptual State of Madagascar

Bou Derga Mauritania Prefeasibility SNIM

El Agareb Iron Ore Deposit Mauritania Conceptual SNIM, Arcelor Mittal 25
Guelb el Aouj Iron Ore Deposit Mauritania Feasibility SNIM, Sphere Inv 2140 2011 18.0 po
Guelb el Rhein Iron Ore Mine Mauritania Operating, exp/plans SNIM 200
Tintekrate Iron Ore Deposit Mauritania Conceptual SNIM

Arcelor Mittal
Faleme Iron Ore Deposit Senegal Prefeasibility (contested) 200 2011 25.0 po

Closed, African Minerals, Cape

Marampa Iron Ore Mines Sierra Leone reopen/plans Lambert 25
Tonkolili Iron Ore Deposit Sierra Leone Prefeasibility African Minerals

Bur Galan Iron Ore Deposit Somalia Conceptual State of Somalia

Welgevonden (Sishen South) Iron Ore

Deposit South Africa Feasibility Anglo American 1029.1 2012 9.0
Operating,
Khumani Iron Ore Mine phase II South Africa exp/constr ARM, AssOre 883.8 2012 8.4
Operating,
Sishen Iron Ore Mine South Africa exp/constr Anglo American 723.3 2009 13.0 c
Cascades Iron Ore Deposit South Africa Conceptual Mkhombi
Operating,
Thabazimbi/ Phoenix South Africa exp/constr Anglo American 2009 pr
Zandrivierspoort Iron Ore Deposit South Africa Prefeasibility Anglo American

Liganga Iron Ore Deposit Tanzania Conceptual State of Tanzania

Muko Iron Ore Deposit Uganda Conceptual State of Uganda

Sukulu Iron Ore Deposit Uganda Conceptual State of Uganda
 Table 12. Ongoing and announced iron ore projects
Project *Expected
Project
Name Country Status Controlled by cost annual ore Completion
completed
MUSD prod (Mt)
Asia
Haijak Iron Ore Mine Afghanistan Conceptual State of Afghanistan
Khaish Iron Ore Deposit Afghanistan Conceptual State of Afghanistan

Exi Iron Ore Deposit China Conceptual Wugang 2120 2015 25.0
Meishan Iron Ore Mine China Operating, exp/plans Baosteel 54 2012
Xiaonanshan China Operating exp/plans London Mining 2011 1.0 pr
Operating,
Gaocun Iron Ore Mine China exp/constr 21.5 2007
Operating,
Jinshandian Iron Ore Mine China exp/feasib Wugang 23 2007
Chonggang Taihe Iron Ore Mine China Operating, exp/plans
Daxigou Iron Ore Mine China Operating, exp/plans Shaanxi Longmen 401.6 5.0
Jielong Iron Ore Mine China Construction Chongqing Iron 32.8
Kendekeke Iron Ore Mine China Construction Qinghua Group 84.5
Luliang Iron Deposit China Conceptual Taiyuan Iron 1270 22.0
Maanshan Iron,
Luohe Iron Ore Deposit China Construction Longqiao 205.1 7
Shirengou Iron Ore Mine China Operating, exp/plans Hebei Steel 61
Tadong Iron Ore Deposit China Conceptual Tonghua Iron 348.2 5.0
Taohua Iron Deposit China Conceptual Chongqing Iron
Xiaoyanzhuang Iron Ore Deposit China Conceptual Sinosteel 2.0
Zhaokou Iron Ore Deposit China Prefeasibility Jinling Mining 0.5

Bara Jamda Iron Ore Deposit India Conceptual Usha Martin 2005 1.0
Bailadila 14 Iron Ore Mine India Operating, exp/plans NMDC 5.5
Chiria Iron Ore Mine India Operating, exp/plans SAIL 664
Kumaraswamy Iron Ore Mine India Feasibility NMDC 60.8
Rowghat Iron Ore Deposit India Prefeasibility SAIL 153

Yogyakarta Ironsands Deposit Indonesia Prefeasibility JMM, Indo Mines 1100 2012 9.0
Nalo Baru Iron Ore Deposit Indonesia Construction Earthstone 40 2009 3.0 c
Cipatujah Iron Sands Deposit Indonesia Feasibility Antam
Desa Mirah Kalanaman Iron Ore Deposit Indonesia Conceptual Samusa Corp., Lincoln 2 2009 0.3 pr
Kalimantan Iron Ore Deposit Indonesia Prefeasibility Krakatau Steel 1000 2010 2.5 po
 Table 12. Ongoing and announced iron ore projects
Project *Expected
Project
Name Country Status Controlled by cost annual ore Completion
completed
MUSD prod (Mt)
Asia
Gole Gohar Iron Ore Mine Iran Operating, exp/plans State of Iran 173.9 2009 pr
Chogart Iron Ore Mine Iran Operating, exp/plans State of Iran 115

Sarbayskoye Iron Ore Mines I Kazakhstan Operating, exp/plans ENRC plc 900 2009 pr
Sarbayskoye Iron Ore Mines II Kazakhstan Operating, exp/plans ENRC plc 580 2011 po
Kacharskoye Iron Ore Mine Kazakhstan Operating, exp/plans ENRC plc 37

Musan Iron Ore Mine Korea DPR Operating, exp/plans State of North Korea 867 10.0

Zhetymskoye Iron Ore Deposit Kyrgyzstan Conceptual

Xienquang Laos Conceptual 4.5 1.5

Closed, Grange Resources,

Bukit Ibam Iron Ore Mine Malaysia reopen/plans Esperance Min 0.8 2008 0.1 pr

Bayangele Iron Ore Deposit Mongolia Prefeasibility Heilongjiang Fe 35 1.5

Tumugali Iron Ore Deposit Mongolia Conceptual Heilongjiang Fe 56.8

Punjab Mineral
Chiniot Iron Ore Deposit Pakistan Prefeasibility Development Corp
Dilband Iron Ore Mine Pakistan Feasibility PPL, State of Pakistan 0.1

Pacific Pearl Iron Ore Deposits Philippines Conceptual Cotton & Western

Wadi Sawawin Iron Ore Deposit Saudi Arabia Feasibility State of Saudi Arabia 1800 2012 2.2

Syuren-Ata Iron Ore Mine Uzbekistan Feasibility State of Uzbekistan 40

Vietnam Steel/ Kunming

Quy Xa II Vietnam Feasibility I&S 50 2010 1.5 pr
Nguon Chang Iron Ore Mine Vietnam Conceptual 3.8
Thach Khe Iron Ore Deposit Vietnam Prefeasibility 350 5.0
 Table 12. Ongoing and announced iron ore projects
Project *Expected
Project
Name Country Status Controlled by cost annual ore Completion
completed
MUSD prod (Mt)
Europe
Novoselkovskoye Iron Ore Deposit Belarus Conceptual State of Belarus
Okolovskoye Iron Ore Deposit Belarus Conceptual State of Belarus 553.4 4.0

Closed,
Hannukainen Iron/Copper/Gold Mine Finland reopen/plans Northland Res 812.1
Closed,
Mustavaara Mine Finland reopen/plans Adriana Resources
Rautavaara Finland Prefeasibility Northland Res
Sivakkalehto Finland Conceptual Tertiary Minerals plc

Isua Iron Ore Deposit Greenland Conceptual London Mining 2009 15.0 pr

Operating,
Rana Iron Ore Mines Norway exp/constr L Nilsen & S 27.5 2009 c
Rana Iron Ore Mines Norway Construction L Nilsen & S 2009 1.0 c
Sydvaranger Iron Ore Mine Norway Susp, restart/plans Northern Iron 106 2009 7.0 c

Goroblagodatsky Iron Ore Mine Russia Susp, restart/plans Evraz Group 11.7 2020
Kovdorsky Iron Ore Mine Russia Operating, exp/plans EuroChem 321.6 2015
Kuranakh Titanium Mine Russia Operating, exp/plans Peter Hambro 168.8 2012
Gubkin Iron Ore Mine Russia Operating, exp/plans Koks OJSC 2010 po
Kimkanskoye Iron Ore Deposit Russia Feasibility Peter Hambro 931.5 2010 7.0 po
Sideritovaya Iron Ore Mine Russia Operating, exp/plans MMK OJSC, Ural 18.2 2010 po
Operating,
Korshunovsky Iron Ore Mine Russia exp/constr Mechel 25 2009 po
Mikhaylovsky Iron Ore Mine Russia Operating, exp/plans Metalloinvest 18.8 2008 pr
Tashtagolsky Iron Ore Mine Russia Operating, exp/plans Evraz Group 43 2007
Volkovsky Copper Mine Russia Operating, exp/plans UGMK 0.7 2007
Baikal Iron Ore Deposit Russia Conceptual
Bakcharskoye Iron Ore Deposit Russia Conceptual TomGDK 27.4
Berezov Iron Ore Deposit Russia Feasibility Luneng 494 2010 5.5 po
Ural Mining, Peter
Bolshoi Seym Iron Ore Deposit Russia Conceptual Hambro
Burlukskoye Iron Ore Mine Russia Construction Evraz Group 3.8 1.3
Chineiskoye Iron Ore Deposit Russia Feasibility BasEl 176.8 1.1
Ermataevskoye Iron Deposit Russia Conceptual Bashkir Mining
 Table 12. Ongoing and announced iron ore projects
Project *Expected
Project
Name Country Status Controlled by cost annual ore Completion
completed
MUSD prod (Mt)
Europe
Estyuninskaya Iron Ore Mine Russia Operating, exp/plans Evraz Group 170
Garinskoye Iron Ore Mine Russia Feasibility Peter Hambro 500 2010 10.0 po
Glubochenskoye Iron Ore Deposit Russia Conceptual Ural Mining
Gusevogorskoye Vanadium/Iron Ore Mine Russia Operating, exp/plans Evraz Group
Kapaevskoye Iron Deposit Russia Conceptual
Khabalykskoye Iron Ore Deposit Russia Conceptual
Kopanskoye Iron/Titanium Deposit Russia Conceptual
Kostenginskoye Iron Ore Deposit Russia Conceptual
Krasnoyarovskoye Iron Ore Deposit Russia Conceptual Mechel 74.6 2012 3.0
Mulginskoye Iron Ore Mine Russia Construction Evraz Group 13.1 1.5
Neryundinskoye Iron Deposit Russia Conceptual
Odinochnaya Iron Ore Mine Russia Construction Evraz Group 17.2 2013 0.7
Polivskoye Iron Deposit Russia Conceptual
Porozhinskoye Manganese Deposit Russia Conceptual State of Russia 27
Prioskolskoye Iron Ore Deposit Russia Conceptual MMK OJSC, Ural 3656 2013 35.0
Pudozhgorskoye Iron Ore Deposit Russia Conceptual State of Russia 1200 7.0
Severopeschanskoye Iron Ore Mine Russia Operating, exp/plans UGMK, Milkom-Invest 3.2
Sobstvenno-Kachkanarskoye Iron Ore
Deposit Russia Conceptual Evraz Group
Sukharinskoye Iron Ore Deposit Russia Prefeasibility Shalymskaya GRE
Suroyamskoye Iron Ore Deposit Russia Conceptual
Sutarskoye Iron Ore Deposit Russia Conceptual Peter Hambro 200 2010 5.0 po
Tabratskoye Iron Ore Depost Russia Conceptual
Tashelginskoye Iron Ore Deposit Russia Conceptual
Tayatskoye Iron Ore Deposit Russia Conceptual
Techenskoye Iron Ore Deposit Russia Prefeasibility MMK OJSC, Ural 40 2.0
Uytashskoye Iron Ore Deposit Russia Conceptual MMK OJSC
Vyiskoye Iron Ore Deposit Russia Conceptual State of Russia
Yakovlevsky rudnik Iron Ore Deposit Russia Conceptual YakovlevskRudnik 60 1.5
Yunyaginskoye Iron Deposit Russia Conceptual State of Russia
 Table 12. Ongoing and announced iron ore projects
Project *Expected
Project
Name Country Status Controlled by cost annual ore Completion
completed
MUSD prod (Mt)
Europe
Tapuli Magnetite Mine Sweden Prefeasibility Northland Res 203.8 2011 3.0 pr
Closed,
Dannemora Iron Ore Mine Sweden reopen/feasib Dannemora Min 127 2009 1.5 po
Kiruna Iron Ore Mines Sweden Operating, exp/plans LKAB 1894.9 2012 c
Ekströmsberg Iron Ore Deposit Sweden Conceptual Grängesberg
Gruvberget Iron Ore Deposit Sweden Conceptual LKAB 2.0
Closed,
Grängesberg Iron Ore Mine Sweden reopen/plans Grängesberg
Kallak Iron Ore Deposit Sweden Conceptual Beowulf
Archelon, IGE,
Kölen Iron Ore Deposit Sweden Conceptual Kopparberg
Archelon, IGE,
Pattok Iron Ore Deposit Sweden Conceptual Kopparberg
Pellivuoma Iron Ore Deposit Sweden Conceptual Northland Res
Ruoutevare Iron/Titanium Deposit Sweden Conceptual Beowulf 92.7 3.0
Salmivaara Iron Ore Deposit Sweden Conceptual Northland Res
Stora Sahavaara Iron Ore/Copper Deposit Sweden Prefeasibility Northland Res 785.6 3.0
Teltaja Iron ore Deposit Sweden Conceptual
Tjårrojåkka Iron Ore Deposit Sweden Conceptual Grängesberg

Poltavskaya Iron Ore Mines Ukraine Operating, exp/plans Ferrexpo 500 2012
Operating,
Gorishni Plavni Iron Ore Mine Ukraine exp/feasib Ferrexpo 158 2011 po
Belanovskoye Iron Ore Deposit Ukraine Prefeasibility Ferrexpo
Brovarkovskoye Iron Ore Deposit Ukraine Prefeasibility Ferrexpo
Eristovskoye Iron Ore Mine Ukraine Construction Ferrexpo 116
Galeshchinskoye Iron Ore Deposit Ukraine Feasibility Ferrexpo
Kharchenkovskoye Iron Ore Deposit Ukraine Prefeasibility Ferrexpo
Krivoy Rog Iron Ore Mines Ukraine Operating, exp/plans Privat Group 500 2009 5.0 pr
Kryviy Rih Iron Ore Deposit Ukraine Conceptual State of Ukraine 804
Kuksungur Iron Ore Deposit Ukraine Prefeasibility 340 2009 3.0 po
Lavrikovskoye Iron Ore Mine Ukraine Construction Ferrexpo 2008 c
Manuylovskoye Iron Ore Deposit Ukraine Prefeasibility Ferrexpo
Vasiljevskoye Iron Ore Deposit Ukraine Prefeasibility Ferrexpo
 Table 12. Ongoing and announced iron ore projects
Project *Expected
Project
Name Country Status Controlled by cost annual ore Completion
completed
MUSD prod (Mt)
Latin America
Sierra Grande Argentina Susp, restart plans LingCheng 105 2011 3.6 po

El Mutun Iron Ore Deposit Bolivia Conceptual JSPL 2100 20.0

Apolo Iron Ore Deposit Brazil Feasibility Vale 2509 2013 24.0
Serra Sul Iron Ore Deposit Brazil Conceptual Vale 11297 2013 90.0
Carajas 130 Mt Brazil Feasibility Vale 2478 2011 30.0
Operating,
Casa de Pedra Iron Ore Mine Brazil exp/constr CSN 919 2010 10.0 po
Corumba Iron Ore Mine Brazil Operating, exp/plans Vale 2110 2010 10.8 po
Carajas 10 Mt Brazil Operating, exp/plans Vale 290 2009 10.0
Corumba (MMX) Iron Ore Mine Brazil Operating, exp/plans EBX Group 86.1 2009 c
Itatiaiucu Iron Ore Mine Brazil Operating, exp/plans Arcelor Mittal 2009 1.8 c
Jucurutu Iron Ore Mine Brazil Operating, exp/plans Noble Group 1600 2009 po
Pico Iron Ore Mines Brazil Operating, exp/plans Vale 282 2008 c
Andorinhas Iron Deposit Brazil Prefeasibility Troy Resources
Caetite Iron Ore Deposit Brazil Prefeasibility Arcelor Mittal 1600
Esperanca Brazil Conceptual Ferrous Resources 3.0
Liberdade Iron Deposit Brazil Conceptual Centaurus
Anglo American, EBX
Minas Rio (MMX) Iron Ore Deposit Brazil Feasibility Group 2300 2009 26.6 po
N5S Iron Ore Deposit Brazil Conceptual Vale
Posse Iron Ore Deposit Brazil Conceptual Crusader Res
Serra Leste Iron Ore Deposit Brazil Conceptual Vale
Vila Nova Iron Ore Deposit Brazil Prefeasibility 39
 Table 12. Ongoing and announced iron ore projects
Project *Expected
Project
Name Country Status Controlled by cost annual ore Completion
completed
MUSD prod (Mt)
Latin America
La Candelaria Tailing Deposit Chile Construction CAP 174 2008 3.0 pr
Wyndham Expl,
Japonesa Iron Ore Mines Chile Operating, exp/plans Admiralty 12 2007 1.5 pr
Bellavista Iron Ore Deposit Chile Prefeasibility JSW Steel, Farkas fam 30 2.5
Boqueron Chanar Iron Ore Deposit Chile Conceptual State of Chile
Cerro Negro Norte Iron Ore Deposit Chile Conceptual CAP 340 3.0
El Laco Iron Ore Deposit Chile Prefeasibility CAP
El Tofo Iron Ore Deposit Chile Conceptual CAP
Javiera Iron Ore Mine Chile Conceptual Soc Minera Varry 8 2008 1.2 po
San Gabriel Iron Deposit Chile Conceptual Anaconda Mining

Magdalena Iron Sands Deposit Colombia Conceptual Vector resources Ltd

Agalteca Iron Deposit Honduras Conceptual

Aquila Iron Ore Deposit Mexico Prefeasibility Arcelor Mittal 32.7 1.0
El Artillero Mexico Conceptual London Mining
Los Pozos Iron Ore Mine Mexico Construction Cotton & Western
Miriam Faraon Iron Ore Deposit Mexico Prefeasibility Arcelor Mittal 60.7 1.5
Pena Colorada Iron Ore Mine Mexico Operating, exp/plans Arcelor Mittal, Techint 70

Marcona Iron Ore Mine Peru Operating, exp/plans Shougang 1000 2011 10.0 c
Cuzco Iron Ore Deposit Peru Conceptual Strike Res 2009 po
Apurimac Iron Ore Deposit Peru Prefeasibility Strike Res 2300 20.0
Cerro Ccopan Iron Ore Deposit Peru Conceptual Cuervo Res Inc
Opaban Iron Ore Deposits Peru Prefeasibility Strike Res
Pampa de Pongo Iron Ore Deposit Peru Conceptual Cardero 3280
 Table 12. Ongoing and announced iron ore projects
Project *Expected
Project
Name Country Status Controlled by cost annual ore Completion
completed
MUSD prod (Mt)
North America
Rio Tinto plc, Mitsubishi,
Carol Iron Ore Mines Canada Operating, exp/plans Labrador Iron Or 468.5 2011 5 po
DSO Iron Deposit Canada Conceptual NML 289 2010 4.0 po
Labrador Iron Ore Deposit Canada Conctruction Anglesey Mining 2010 2.0 c
Bloom Lake Iron Ore Deposit Canada Construction Cons Thompson 455.4 2009 8.0 c
Crest Iron Ore Deposit Canada Feasibility Chevron Res
KeMag Iron Ore Deposit Canada Feasibility NML 3800
LabMag Iron Ore Deposit Canada Prefeasibility NML 2750 2011 35.0 po
Lac Jeannine Iron Ore Tailings Deposit Canada Conceptual
Lac Otelnuk Iron Ore Deposit Canada Conceptual Bedford Resource
Mary River Iron Ore Deposit Canada Feasibility Matachewan 3841.5 2011 18.0 po
Peppler Lake Iron Ore Deposit Canada Conceptual Quinto 1190.2 22.0
Redford Mineral Deposit Canada Conceptual Logan Resources
Roche Bay Canada Conceptual Roche Bay plc
Schefferville Iron Ore Deposit Canada Feasibility Anglesey Mining 30 1.5
US Steel, Arcelor Mittal,
Wabush Iron Ore Mines Canada Operating, exp/plans Cliffs 120

Comstock Iron Ore Mine USA Susp, restart/plans Palladon

Hoyt Lake Iron Ore Project USA Mesabi Mining LLC 165 2010 po
Essar Steel Minnesota
Nashwauk Iron Ore Project USA Feasibility LLC 1600 4.1
Northshore (Babbit) Iron Ore Mine USA Operating, exp/plans Cliffs 50
 Table 12. Ongoing and announced iron ore projects
Project *Expected
Project
Name Country Status Controlled by cost annual ore Completion
completed
MUSD prod (Mt)
Oceania
Hawks Nest Iron Ore Deposit Australia Conceptual Western Plains 2012 6.0
AMCI, Aquila
West Pilbara Iron Ore Deposit Australia Prefeasibility Resources, Cullen 84.4 2012 30.0
Operating,
Rapid Growth Project 5 Australia exp/feasib BHP Billiton Gr 4800 2011 50.0 c
Brockman No 4 Iron Ore Deposit Australia Conceptual Rio Tinto plc 1521 2010 22.0 c
Extension Hill Iron Ore (HM) Deposit Australia Feasibility APAC 48.9 2010 pr
Operating,
Frances Creek Iron Ore Deposit Australia exp/feasib Territory Res. 25 2010 3.0 po
Karara/Mungada Iron Ore (Mg) Deposit Australia Feasibility Gindalbie 1424.8 2010 8.0 pr
Koolanooka-Blue Hills Iron Ore (Hematite)
Mine Australia Prefeasibility Sinosteel 2010 7.5 po
Rio Tinto plc, Mitsui,
Nippon Steel, Sumitomo
Mesa A/Warramboo Australia Conceptual Met Ind 901 2010 25.0 c
Operating,
Rapid Growth Project 4 Australia exp/constr BHP Billiton Gr 2150 2010 26.0 c
Abydos Iron Ore Deposit Australia Prefeasibility Atlas Iron 59.3 3.0
Cairn Hill Magnetite-Iron/Copper/Gold Mine Australia Construction IMX Res 2009 1.4 c
Iron Magnet II Australia Construction One Steel 252 2009 2.0 c
Karara/Mungada Iron Ore (Hm) Deposit Australia Conceptual Gindalbie 90.4 2009 2.0 pr
Paulsens East Australia Conceptual Strike Res 2009 1.0 po
Peculiar Knob Iron Ore Deposit Australia Feasibility Western Plains 90.8 2009 3.0 po
Robertson Range Iron Ore Deposit Australia Conceptual FerrAus 2009 2.0 po
Argyle Iron Ore Deposit Australia Prefeasibility Kimberly Metals Group 50
Rio Tinto plc, Hancock
Bakers South Iron Ore Deposit Australia Conceptual Prospect
Bald Hill Iron Ore Deposit Australia Conceptual Centrex
Balla Balla Iron Ore/Vanadium Deposit Australia Feasibility Aurox 200.4
Balmoral Central Magnetite Deposit/Sino
Iron Magnetite Project Australia Conceptual Citic Pacific 2922.5
 Table 12. Ongoing and announced iron ore projects
Project *Expected
Project
Name Country Status Controlled by cost annual ore Completion
completed
MUSD prod (Mt)
Oceania
Balmoral South Iron Ore Deposit Australia Conceptual Australasian Res 2254.5
Barrambie Vanadium Deposit Australia Feasibility Reed Res 438.8
Beebyn-Weld Range Iron Ore Deposit Australia Conceptual Giralia
Blue Hills Iron Ore Deposit Australia Prefeasibility Gindalbie
Bungalbin Iron Ore Deposit Australia Conceptual Cliffs
Bungalow Iron Ore Deposit Australia Conceptual Centrex
Buzzard Iron Ore Deposit Australia Conceptual Western Plains
Caliwingina Iron Ore Deposit Australia Conceptual Rio Tinto plc
Cape Lambert Iron Ore Deposit Australia Feasibility MCC 501
Caramulla South Iron Ore Deposit Australia Conceptual Warwick
Carina Iron Deposit Australia Prefeasibility Polaris Metals
Carrow Iron Ore Deposit Australia Conceptual Centrex
Christmas creek/ cloudbreak II Australia Prefeasibility Fortescue 2500 45.0
Davidson Creek Iron Ore Deposit Australia Conceptual FerrAus
East Angelas Iron Ore Mine Australia Conceptual Hancock Prospect
Eyre Peninsula Iron Ore Deposit Australia Conceptual Centrex
Fortescue Iron Ore Mine Australia Construction Mineralogy 1171.8
George Palmer Iron Ore Deposit Australia Prefeasibility Australasian Res
Giffen Well Iron Ore Deposit Australia Conceptual Felix Resources
Rio Tinto plc, Hancock
Giles Mini Iron Ore Deposit Australia Conceptual Prospect
Hamersley Undeveloped Iron Ore Deposits Australia Conceptual Rio Tinto plc
Hardey Iron Ore Deposit Australia Conceptual Aquila Resources
Rio Tinto plc, Hancock
Hope Downs Australia Feasibility Prospect 364 8.0
Iron Valley Deposit Australia Conceptual Iron Ore Hold 0.8
Irvine Island Iron Ore Deposit Australia Conceptual Cliffs, Pluton Resources
Jack Hills Iron Deposit Australia Prefeasibility Sinosteel
Operating,
Jack Hills Iron Ore Mine Australia exp/constr Murchison Metals 697.7
 Table 12. Ongoing and announced iron ore projects
Project *Expected
Project
Name Country Status Controlled by cost annual ore Completion
completed
MUSD prod (Mt)
Oceania
Jimblebar Range Iron Ore Deposit Australia Conceptual Warwick
Kestrel Iron Ore Deposit Australia Conceptual Western Plains
Koolanooka-Blue Hills Iron Ore (Magnetite)
Mine Australia Prefeasibility Sinosteel 411.6 4.5
Koppio Iron Ore Deposit Australia Conceptual Centrex
Lebtheinia Iron Ore Deposit Australia Conceptual Sphere Inv
Marillana Iron Ore Deposit Australia Conceptual Brockman Res 508 10.0
Metawandy Iron Ore Deposit Australia Conceptual Rio Tinto plc
Mindy Mindy Iron Ore Deposit Australia Feasibility Palmary, Fortescue 22.6
Mount Constance Iron Ore Deposit Australia Conceptual Viento
Mount Gibson Iron Ore Deposit Australia Feasibility Shougang 538.4 5.0
Mount Jackson Iron Ore Deposit Australia Conceptual Cliffs
Mount Karara Iron Ore Deposit Australia Feasibility Gindalbie 1300 20.0
Mount Lindsay (Renison West)
Magnetite/Tin Deposit Australia Conceptual Venture Minerals
Mount Nicholas Iron Ore Deposit Australia Conceptual Fortescue 207.7
Mount Oscar (Fox) Iron Ore Deposit Australia Conceptual Fox Resources
Mount Peake Vanadium Deposit Australia Conceptual TNG
Mt Caudan Iron Ore Deposit Australia Conceptual Cazaly Resources
Nelson Bay Iron Ore Deposit Australia Prefeasibility Gujarat NRE Ltd 15.1 0.1
Nullagine Iron Ore Project Australia Feasibility BC Iron 20.9 5.0
Pardoo (Ridley) Magnetite Deposit Australia Prefeasibility Atlas Iron 1400 10.0
Phil's Creek Iron Ore Australia Conceptual Iron Ore Hold 1.5
Railway Iron Ore Deposit Australia Conceptual United Minerals
Rocklea Iron Ore Deposit Australia Conceptual Murchison Metals
Roy Hill Iron Ore Deposit Australia Prefeasibility Hancock Prospect
Shovelanna Iron Ore Deposit Australia Conceptual Cazaly Resources 5.0
 Table 12. Ongoing and announced iron ore projects
Project *Expected
Project
Name Country Status Controlled by cost annual ore Completion
completed
MUSD prod (Mt)
Oceania
Solomon Iron Ore Deposit Australia Conceptual Fortescue
South Murchison Iron/Gold Mine Australia Conceptual Batavia Mining
Grange Resources,
Southdown Iron Ore Mine Australia Prefeasibility Sojitz 640 6.6
Spinifex Ridge Iron Ore Deposit Australia Conceptual Moly Mines
Weld Range Iron Ore Deposit Australia Conceptual Sinosteel 655.5 15.0
Aquila Resources, Red
West Pilbara - Red Hill Iron Ore Deposit Australia Prefeasibility Hill Iron Lt
Western Creek Iron Ore Deposit Australia Conceptual Giralia
Wilcherry Hill Iron Ore Deposit Australia Conceptual Ironclad Mining, Trafford
Wilgerup Iron Ore Deposit Australia Prefeasibility Centrex
Wiluna West Iron Ore Deposit Australia Prefeasibility Golden West 10.0
Windarling Iron Ore Deposit Australia Conceptual Cliffs
Wodgina Iron Ore Deposit Australia Feasibility Atlas Iron 6.6 2.0
Wonmunna Iron Deposit Australia Conceptual Talisman Mg
Yalgoo Iron Ore Deposit Australia Conceptual Ferrowest 388.5 2.4
Helix Resources, Aquila
Yalleen Iron Ore Deposit Australia Conceptual Resources
Yilgarn Iron Ore Deposit Australia Conceptual Polaris Metals 169.7

1) Explanations: C = Certain; PR = Probable; PO = Possible; na = Investment to maintain production at present level.

2) The exchange rates used are those at the day of announcement of each project and hence vary considerably over the years.

Source: Raw Materials Data, Mines & Projects, 2009

 86

VI. THE OUTLOOK FOR 2009 AND 2010

OUTLOOK FOR THE STEEL MARKET

Crude steel production fell precipitously in the final months of 2008 and the rate of
production remained at a level clearly below that of 2008 during the first several months of
2009 (see figure 11). Negative growth in steel production is not unheard of. During four
earlier recessions since 1970 world steel demand declined, although the falls were generally
between 0 and 5 %. Only after the first oil crisis in 1973-1974, when world GDP growth fell
to 1 %, was the fall in steel demand greater than 10 %. This recession is as deep and while the
effect on steel output in the developed world would be expected to be smaller, given today’s
lower steel intensity in these economies, it is offset by the higher steel intensity in China and
other rapidly industrializing economies.

Figure 11. Monthly world crude steel production, change year on year, per cent

Source: World Steel Association

The outlook for the world economy has improved somewhat in recent months. There is hope
that the recession is beginning to “bottom out” in developed countries towards the end of
2009, while in developing countries, growth is positive and may be on the way to returning to
pre-crisis levels. This is the case particularly in China, where the resurgence is showing signs
of affecting steel demand. Apparent steel use in China fell from July to December 2008, when
it started rising again. In the first quarter of 2009, growth was fast, making up for lost time
and putting China’s steel demand more or less back on the long term trend in April.

In the rest of the world, steel mills have introduced massive production cuts and cost-cutting
programmes. According to OECD, in May 2009, steel production was running at 43 % of
capacity in the United States, 49 % in the EU, and 55 % in Japan. The recession has also led
to a very large slowdown in trade.

Steel prices continued to fall during the first months of 2009. In May, global average prices
were 55 % lower than the peak reached in July 2008 and looked to be trending downwards.
Only in China did prices appear to have reached a plateau.. Steel prices are very volatile due
 87

to frequent regional mismatches between production and demand. If inventory reductions by

steel mills and steel using industries continue at the current pace, then any stabilization in
demand could trigger at least a temporary rise in prices.

The latest World Steel Association’s medium term forecast, presented in April 2009, which
anticipates a fall in steel use by almost 15 % in 2009, can be characterized as relatively
cautious (see table 13). While there is little reason to be very optimistic about growth
prospects in developing countries, steel demand in China was above 2008 levels in the first
quarter of 2009 and it is possible that the impact of China’s very large stimulus package will
be sufficient to yield positive growth in steel use over the entire year rather than the 5 % fall
forecast. Similarly, the composition of macro-economic stimuli in other countries, with an
emphasis on construction and support to the transportation industry, is such that the measures
are likely to have a positive effect on steel demand. The measures are all just starting to have
an effect and it is possible that they will be reinforced by an end to the inventory cutting
process. All these factors argue that the upside potential is more important than the downside,
relative to the World Steel Association’s forecast.

Table 13. Apparent steel use 2008-2010, Mt

Region 2008 2009 2010 Annual growth, %

07/08 08/09 09/10
EU(27) 181.5 129.2 -8.4 -28.8
CIS & Other Europe 78.8 59.9 -10.5 -24.0
NAFTA 129.7 88.0 -8.2 -32.2
Central & South America 44.4 38.1 5.9 -14.1
Africa 26.2 26.1 4.3 -0.1
Middle East 43.1 39.8 6.8 -7.5
Asia-Pacific excl.China 268.1 233.1 0.7 -13.1
China 425.7 404.4 2.9 -5.0
World 1197.4 1018.6 1110.0 -1.4 -14.9 9

Source: World Steel Association (figures for 2008 and forecast for 2009).

The World Steel Association has not prepared any forecast for 2010. However, there appears
to be general agreement that an upturn, albeit maybe modest in developed countries, can be
expected that year. China and other emerging economies may be more or less back on track –
with the difference being that slower world demand growth will slow down the growth of
China’s manufactures exports and oblige China to shift its growth model to one that relies
more on the domestic market. In addition, rebuilding of inventories should have a significant
positive effect on steel demand. A growth of 9 % in world steel use does not appear
reasonable, particularly since this will still only have brought world demand to a level 7 %
lower than that reached in 2008.

OUTLOOK FOR THE IRON ORE MARKET

At present, in June 2009, the iron ore market shows signs of some tightening. A surge in
Chinese imports has led to rising spot prices. Although it is believed that some of the import
increase is due to importers expecting prices to rise later, rather than to actual increased
demand, it is clear that the upturn in Chinese steel production has also played a role.
 88

After Rio Tinto and Nippon Steel had reached their agreement on prices it was uncertain if the
rest of the industry would follow their lead. The agreement was strongly criticized by Chinese
steel producers in particular, who were said to be pushing for a cut of 40 %. Although the
Chinese steel mills have not yet agreed to new prices, it would appear reasonable to expect a
relatively rapid final settlement to this very long process, considering that the difference
between 33 and 40 % is hardly enormous. It is helpful to place the agreement in perspective:
Taking into account the changes in exchange rates over the past year, the settlement
negotiated by Rio Tinto corresponds to a cut of 20 % in Australian dollar terms compared to
the price twelve months ago. For Vale, a 28.8 % cut in the US dollar price, which is the level
at which it recently settled, corresponds to a 9.5 % cut in Brazilian Reais compared to the
price a year ago. Since many elements of production costs (energy, for example) for both
producers are less expensive than a year ago, the cut can not be claimed to be disastrous.
Similarly, for Chinese steel companies, the fall in freight rates means that the price of landed
iron ore from Australia declines by 42 %, while that of Brazilian ore declines by 60 %
compared to June 2008. While steel prices have indeed fallen from their earlier peaks, it is
difficult to claim that the iron ore price negotiated by Rio Tinto would by itself undermine the
profitability of steel companies, particularly with spot prices in China at just above US$
70/ton, or very close to the landed price of Rio Tinto ore at the new price.

Accordingly, it appears likely that the Rio Tinto-Nippon Steel agreement will be accepted as a
benchmark. Prices for Brazilian ore have declined by slightly less, since the reason for the
higher price increase for Australian ore in 2008, the large difference in freight rates, has
effectively disappeared. The acceptance of the first deal as a benchmark was maybe
confirmed on 12 June when BHP Billiton and JFE Steel in Japan agreed on the same price
reductions as Rio Tinto and Nippon Steel.

As for the benchmark pricing system itself, it is clear that the case for change has been
strengthened by events of the past year. It may be too early, however, to conclude that the
benchmark pricing system will disappear. In fact, the benchmark system and alternatives may
co-exist for a considerable time, although the trend is towards more flexibility, with hedging
possibilities providing some of the attraction. It deserves to be noted, however, that a market
dominated by spot deals could easily become uncompetitive. Since there is no exchange for
iron ore, the highly concentrated supply could, in a less than transparent system based on spot
deals, lead to considerable influence for producers. Moreover, since assured off-take is
usually a condition for finance being made available, new entrants could find it more difficult
to raise finance and develop new sites if a smaller share of the market is covered by long term
contracts, thus reinforcing the trend towards higher concentration of supply. Moreover, the
need for steel mills to be assured of consistent quality over time also (see chapter I) argues
strongly for a continued important role for long term contracts. These contracts will need to
have transparent and flexible price provisions, which implies either a recognized reference
price or something very much like the benchmark system

When analysing probable developments over the medium term, this report has usually utilized
a type of gap forecast, comparing projected capacity, based on investment plans, with
assumptions about steel production. This approach is less useful in the present situation. The
world iron ore industry is operating far below capacity. Even under the most optimistic
assumptions about steel production, demand for iron ore will surely be lower in 2009 than in
2008. Moreover, even before the recession, it was clear that the volume of projects in the
investment pipeline exceeded expected demand. Last year’s report stated “This would appear
to point to an over-supply situation developing in 2009 or, at the latest, in 2010.” It was of
 89

course noted that it would not take many delays to turn the surplus projected for 2009 into a
deficit. However, the financial crisis settled the issue and the reality of excess capacity can not
be disputed. For the sake of illustration, figure 12 is instructive. It shows the expected change
in iron ore demand over the period 2009-2011, based on table 13, with the further assumption
that world crude steel production will increase by 9 per cent in 2011. While the World Steel
Association forecast for 2009 may be considered to be conservative, forecasts of 9 %
increases in 2010 and 2011 are open to the opposite criticism. The figure also shows the
additional capacity that is likely to come into operation over this period based on the list of
projects in table 12, divided into “certain” and “probable” projects.

Figure 12. Supply-demand balance 2009-2011 (Mt/y)

It is clear from the figure that the present oversupply situation will not go away soon. There
are, however, two important factors that affect the outlook, although they do not eliminate the
supply overhang. The two factors are expected low freight rates and high costs in Chinese
iron ore mines.

Until 2011, the large producers are likely to gradually return production to pre-crisis levels.
Given the price reductions agreed this year, the producers carrying the heaviest burden are
likely to be those that do not have long term contracts with buyers and that have costs that are
too high to realistically compete on the commodity spot market.

The largest group of mines fitting this description is that comprised of the small and medium
size Chinese producers who will most likely be forced to substantially reduce their output,
particularly since they are no longer protected by high freight costs for imported iron ore.
Figure 13 illustrates their problem. From early 2007 until the autumn of 2008 they enjoyed
very high prices, considerably exceeding the benchmark prices, even taking into account the
cost of freight to China. The rapid expansion of world and Chinese steel production meant
that marginal deposits with very high operating costs could compete on the Chinese market.
 90

Eventually, the financial crisis and the ensuing recession put an end to the expansion. Steel
prices dropped and freight rates fell precipitously, along with spot prices for iron ore. In late
2008, the combination of lower spot prices and reduced freight rates put overseas producers
with contract prices and domestic Chinese miners on an equal footing in terms of the price for
landed ore. It is estimated that half the Chinese iron ore mining industry is at present
operating at a loss and is being sustained by assistance from governments at different levels.

Figure 13. Benchmark and spot prices, US$/ton, 2005-2009

Sources: TEX Report, Metal Bulletin

In the medium term, it is likely that contract prices will stay at a level corresponding to that of
current spot prices, that is, US$ 70/ton of landed ore in China. A consequence of this price
shift will be a shakeout of Chinese iron ore mining. The effect of the price fall will be
reinforced, as far as the Chinese mines are concerned, by rising costs for health and safety
measures, environmental management and rising energy prices. It is probable that between
one third and half of Chinese iron ore capacity will close over the next three years, with 40
per cent, or 130-150 million tons, being the most likely reduction figure. As domestic
production in China falls, the potential slack will be taken up by new investment, particularly
by “the big 3”. This will allow the industry in the rest of the world to maintain operating rates
that generate a contribution to fixed costs, although they will not produce at full capacity.
 91

VII. SOME COMMENTS ON THE STATISTICS

Routines and practices for presenting iron ore statistics have evolved over a period of several
decades. These practices reflect limitations and constraints imposed by the available source
data as well as industry conventions. In some cases, the constraints have become less
important and industry conventions have evolved. Accordingly, it may be useful to review
possible changes that would increase the value of the statistics to users in industry and
government. In the following, some examples of practices that could be changed are
discussed.

Contrary to the practice used for statistics on other metals, figures for iron ore production and
trade are normally presented in gross or natural weight and not as the metal content of the
natural ore or concentrates produced. This raises several problems having to do with the
comparability of data concerning different mines or countries. First, the natural iron content
of ore varies dramatically, with mines in China at one extreme producing ore with an average
iron content of less than 30 % while many other countries produce ore with an iron content of
above 60 %. Second, the term iron ore may refer to natural ore, concentrates or pellets, which
of course have different iron content. Third, reported figures may refer to either wet or dry
ore. The difference between the two measures is on the order of five to ten per cent. We have
chosen to present figures for wet ore, since this is the most commonly used measure, and we
recalculate figures from sources that refer to dry ore. However, it is obvious that this method
is not immune to mistakes and that it raises issues of comparability of figures. In some
countries, such as Australia, figures are given partly in wet weight, partly in dry weight,
complicating the situation further. In other countries, in particular India, where the monsoon
rains change the weight of the concentrates shipped considerably over the year, this problem
is further exacerbated.

Figures on iron ore production normally include only iron ore that is intended for steel
production. In the case of most other metals, the total production is reported and a distinction
is made later between metallurgical and other uses. At present, we are following the practice
of including iron ore produced for non-metallurgical purposes such as pigments, with non-
negligible quantities identified in footnotes to the tables. There is one exception to this
practice: unless otherwise stated, we do not include the iron content in nickel concentrates
from laterite ores, although this is reported as iron ore in some national trade statistics.

Another problem is the difficulty of identifying production from ‘captive producers’, in for
example Turkey and Mexico. In order to understand the global market for iron ore it is of
course important to obtain complete data from these countries. We are gradually improving
data concerning these producers and we expect that the situation will improve further in the
future.

In some of the statistical tables there is a line “Other Latin America” or similar. We are
constantly striving to be more specific in the statistics and our goal is to eliminate these lines.

We believe that it is in the interest of all stakeholders in the iron ore industry to obtain
transparent, timely and consistent iron ore statistics regularly. It is however proving to be
increasingly difficult to reach these goals as the availability of consistent statistics of high
quality is posing ever greater problems. With the European Union expanding, the distinction
between external and internal trade is becoming blurred and statistics are becoming less
 92

trustworthy. Moreover, during the recent boom period it became clear that commercial
considerations act to reduce the availability of data, particularly on prices and other
commercially sensitive parameters. With the emerging importance of captive production
some producers do not want to give detailed figures, believing it is not necessary when the
products do not enter the open market. We should like to emphasize that it is in the interests
of all, both suppliers and buyers, to be able to base their considerations and analyses on
correct and timely statistics and we urge all users of these statistics to help us by delivering
useful, correct and comparable figures.

In addition to the printed statistics we also have available more detailed statistics starting
earlier than the 10 years that we currently report in the printed version. These tables can be
obtained separately in Excel format from the Trust Fund secretariat.
 93

ABBREVIATIONS

a annum
AIM Alternative Investment Markets
ARM African Rainbow Mining
BEE Black Economic Empowerment
BOF basic oxygen furnace
c US cent
Cia Compania
CIS Commonwealth of Independent States
CISA China Iron & Steel Association
CITIC China International Trust and Investment Corp
CMP Cia Minera del Pacífico
Concept Conceptual study
Conf Confidential
Constr Under construction
CSN Cia Siderurgica Nacional (Brazil)
ctd continued
CVRD Compania Vale Rio Doce
dmtu dry metric ton unit
DRI direct reduced iron
DWT deadweight
EAF electric arc furnace
EU (15) European Union with 15 member countries
Feasib Feasibility study
FOB Free on board
HHI Herfindahl-Hirschman Index
IISI International Iron and Steel Institute
IOC Iron Ore Company of Canada
Isdemir Iskerderun Demir ve Celik A.S.
ISG International Steel Group
GDP gross domestic product
GOK mining and beneficiation plant (Russian acronym)
Erdemir Eregli Demir ve Celik Fabrikalari T.A.S.
KIOC Kudremukh Iron Ore Company
KMA Kursk Magnetic Anomaly Area
kt thousand metric tonnes
LKAB Loussavaara Kiirunavaara AB
ltu long ton dry unit
M&A mergers and acquisitions
MAUD million Australian dollar
MBR Mineracoes Brasileiras Reunidas SA
MINR million Indian rupees
MCNY million Chinese yuan renminbi
MRUB million Russian rouble
MSEK million Swedish Krona
Mt million metric tonnes
MUSD million US dollar
MZAR million South African rand
na not applicable, not available
 94

NAFTA North American Free Trade Association

NISCO National Iranian Steel Company
NMDC National Mineral Development Company
OECD Organisation for Economic Co-operation and Development
Prefeas Prefeasibility study
q quarter
QCM Quebec Cartier Mining
RMG Raw Materials Group
RSA Republic of South Africa
SAIL Steel Authority of India
SNIM Societé National Industrielle et Minière
SSGPO Sokolov-Sarbay Mining Production Association
SSY Simpson Spence & Young
t metric tonne
Tisco Tata Iron & Steel Co
TSX Toronto Stock Exchange
UNCTAD United Nations Conference on Trade and Development
USD US dollar
USSR Union of Soviet Socialist Republics
ww Western World
y year
 95

SOURCES

The present report draws on a host of different sources. The following is not intended to be a
full bibliography but simply a listing of the most important sources used:

• First hand, original reports from countries, companies and individuals with whom
UNCTAD and the Raw Materials Group have cooperation agreements.

• Journals: Gornyi Zhurnal (in Russian), The Tex Report, Metal Bulletin, Metal Bulletin
Monthly, Mining Journal, Interfax Mining & Metals Report, China Metals Report
Weekly (Interfax), China Metallurgical Newsletter, Antaike Iron & Steel Monthly,
Skillings Mining Review.

• Special reports by: Drewry Shipping Consultants, SSY Consultancy & Research Ltd.,
Mr Jacques Astier (France), Midrex Technologies, Raw Materials Group, Techno
Economic Services (India).

• Statistics: Raw Materials Data, World Steel Association, Midrex World Direct
Reduction Statistics, various national statistical agencies.

• Printed sources:
Carlton, D. and J. Perloff, Modern Industrial Organization, HarperCollins College,
New York 1994.
Who owns who in mining, Raw Materials Group, Roskill Information Services,
London 2001.
Les minerais de fer et leur préparation, Vol 1 and 2, 2003. Special editions of the
journal Les Techniques de l’Industrie Minérale no 16, December 2002 and no 17,
January 2003.
Table A8. Iron ore: Prices to Europe (US cents per 1 % Fe per ton) (1)

Change
Exporter Ore type 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 09/08 %

Australia
Hamersley (2) fines 36.50 38.15 35.00 39.40 55.53 - - - - na
Hamersley (2) lumps 45.56 47.21 42.73 47.79 65.47 - - - - na
BHP Billiton (Mount Newman) (2) fines 36.50 38.15 35.00 39.40 55.53 - - - - na
BHP Billiton (Mount Newman) (2) lump 45.56 47.21 42.73 47.79 65.47 - - - - na
BHP Billiton (Yandi) (2) fines 34.71 36.28 33.29 37.47 52.81 - - - - na
Robe River (3) fines 31.55 na na na .. - - - - na

Brazil
Vale fines (Itabira) 27.67 28.92 28.62 31.04 36.45 62.51 74.39 81.46 134.41 na
Vale fines (Carajas) 28.79 30.03 29.31 31.95 37.90 65.00 77.35 84.70 140.60 na
Vale pellets BF Tubarão 49.24 50.10 47.36 52.00 61.88 115.51 112.04 117.96 220.20 na
Vale pellets DR Tubarão 52.93 53.86 50.91 55.90 66.52 127.06 123.25 129.76 242.22 na
Vale pellets BF São Luís na na na 52.96 63.60 118.57 115.01 121.08 226.02 na
Vale pellets DR São Luís na na na 56.93 68.37 130.43 126.52 133.19 - na
Vale lump (Carajas) 33.94 35.18 34.31 37.36 44.46 79.58 94.70 103.70 - na
MBR fines 27.67 28.92 28.62 31.04 36.45 62.51 74.39 81.46 - na
MBR lump (BFLO) na na na na na na na 100.46 197.40 na
Samarco pellet feed 22.14 23.14 22.90 - - - - - - na
Samarco BF grade pellets 48.43 49.25 46.68 51.36 60.86 113.62 111.40 117.28 .. na
Samarco DR grade pellets na na na na na na na na 242.22 na

Canada
IOC (Carol Lake) fines 28.60 29.90 29.00 31.80 38.90 66.71 78.25 86.40 145.80 na
IOC (Carol Lake) pellets 50.60 51.53 48.30 53.22 64.50 120.06 115.86 122.58 228.82 na
QCM (Mount Wright) fines 28.60 29.90 29.00 31.80 38.90 66.71 78.25 86.40 145.80 na
QCM (Mount Wright) pellets 50.60 51.53 48.30 53.22 64.50 120.06 115.86 122.58 228.82 na

Chile
Huasco (4) pellets 51.94 - - - - - - - - -

1) Calendar years. Unless otherwise specified, prices are on a FOB-DMT (dry metric ton) basis.
2) C & F (Rotterdam).
3) Until 1997 C&F. .. : Price unknown.
4) Before 1998 Algarrobo. - : No sale, no price.

Source: The Tex Report.

Table A8. Iron ore: Prices to Europe (US cents per 1 % Fe per ton) (1) (ctd)

Change
Exporter Ore type 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 09/08 %

Mauritania
SNIM fines (TZF) 29.94 31.40 30.25 33.24 41.35 70.92 82.65 91.00 152.88 na
SNIM fines (Guelb) 29.64 31.10 29.95 32.94 41.05 70.62 82.35 90.70 152.58 na
SNIM fines (XF) na na na na na na na na 145.24 na
SNIM lump 34.15 35.54 33.69 37.08 46.13 79.12 92.21 100.86 198.19 na
na
South Africa na
Kumba Resources (Iscor) fines 22.30 23.26 22.70 24.74 29.35 50.34 59.90 65.59 conf. na
Kumba Resources (Iscor) lump 31.41 32.42 30.80 33.54 39.79 60.24 71.69 78.50 conf. na
na
Sweden na
LKAB fines (MAF) 32.33 33.80 31.93 35.45 44.43 75.84 86.90 96.50 164.0 na
LKAB fines (KBF) 31.83 33.30 31.43 34.95 43.93 75.34 86.40 96.00 163.5 na
LKAB pellets 53.00 54.08 49.95 55.62 69.25 128.00 122.21 131.0 244.54 na
na
Venezuela na
CVG (2) fines 36.50 38.15 35.00 39.40 55.53 na na na na na

1) Calendar years. Unless otherwise specified, prices are on a FOB-DMT (dry metric ton) basis.
2) C & F (Rotterdam) .. : Price unknown.
- : No sale, no price.
Source: The Tex Report.
Table A9. Iron ore: Prices to Japan (US cents per 1 % Fe per ton) (1)

Change
Exporter Ore type 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 09/08 %

Australia (2)
Hamersley fines 27.79 28.98 28.28 30.83 35.99 61.72 73.45 80.42 144.66 97.00 -32.9
Hamersley lump 36.84 38.03 36.13 39.35 45.93 78.77 93.74 102.64 201.69 112.00 -44.5
BHP Billiton (Mount Newman) fines 27.79 28.98 28.28 30.83 35.99 61.72 73.45 80.42 144.66 97.00 -32.9
BHP Billiton (Yandi) fines 26.12 27.24 26.58 28.98 33.83 58.02 69.04 80.42 144.66 na
BHP Billiton (Mount Newman) lump 36.84 38.03 36.13 39.35 45.93 78.77 93.74 102.64 201.69 112.00 -44.5
BHP Billiton (Yandi) lump 33.52 34.60 31.76 34.59 41.03 70.35 na na na na
Robe River fines 22.15 23.10 22.55 24.58 29.16 49.20 58.54 64.10 115.30 na
Robe River lump 28.64 27.21 29.63 34.60 59.34 70.61 na na na na
Savage River (3) pellets 44.50 45.28 - - - - - - - na

Brazil
Vale (2) fines (Itabira) 24.91 25.98 25.36 27.64 32.27 55.34 65.85 72.11 118.98 85.43 -28.2
Vale (2) fines (Carajas) 25.41 26.48 25.86 28.14 32.76 56.18 66.85 73.20 125.17 89.87 -28.2
Vale lump (Itabira) 27.45 28.34 26.92 29.32 34.78 61.28 72.91 77.72 179.04 99.42 -44.5
Vale (2) lumps (New Tubarão A) 27.45 28.34 26.92 29.32 34.78 72.39 86.14 91.11 .. na
MBR fines 25.39 26.48 25.84 28.17 33.42 57.32 68.21 74.69 .. na
MBR lump 27.27 28.15 26.74 29.32 34.78 59.65 88.82 97.26 181.78 100.94 -44.5
MBR pellet feed 20.92 21.82 21.30 23.91 28.36 54.54 64.90 71.07 .. na
Nibrasco (2) pellets 47.03 47.85 45.23 49.66 60.02 112.04 108.68 114.42 213.59 110.43 -48.3
Samarco pellet feed 20.92 21.82 21.30 23.91 28.36 47.52 56.55 61.92 conf. na
Samarco BF grade pellets na na na 49.66 59.10 110.32 107.01 112.66 213.59 na
Samarco DR grade pellets na na na na na na na na 242.22 125.23 -48.3

Canada
IOC (Carol Lake) fines 24.16 25.20 24.60 26.81 31.80 54.54 64.90 71.06 .. na

Chile
Romeral fines 19.29 20.12 19.64 21.41 29.51 50.61 60.23 .. .. na
Huasco (4) pellets 43.82 44.59 42.15 46.28 59.10 110.32 107.11 .. .. na

1) The table refers to the Japanese fiscal years which start 1 April. - : No sale, no price.
Unless specified otherwise, prices are on a FOB-DLT (dry long to.. : Price unknown.
2) From 2004 prices are on a FOB-DMT (dry metric ton) basis.
3) In 2002 and 2003 sales to China only.
4) Before 1998 Algarrobo.

Sources: The Tex Report and company reporting.

Table A9. Iron ore: Prices to Japan (US cents per 1% Fe per ton) (1) (ctd)

Change
Exporter Ore type 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 09/08 %

India
Bailadila fines 26.67 27.82 27.15 29.59 35.10 60.20 71.64 78.45 141.12 na
Bailadila lump 35.53 36.87 35.03 38.15 45.25 77.60 92.34 101.11 198.68 na
Donimalai lump 33.81 34.90 33.16 - - 74.90 89.13 97.71 .. na
Donimalai fines 25.34 26.43 25.80 28.12 33.36 60.20 71.64 78.45 .. na
MMTC basic grade lump 33.06 34.13 32.42 35.31 41.88 73.44 87.39 95.69 .. na
MMTC high grade lump 34.78 35.90 34.11 37.15 44.07 77.12 91.77 100.49 .. na
Kudremukh (2) concentrates 21.46 22.38 21.84 23.81 28.24 .. .. .. .. na
Goa No 9 berth (2) fines 21.42 22.34 21.81 23.78 .. .. .. .. .. na
na
New Zealand na
Taharoa iron sand 17.32 18.07 17.63 19.22 22.80 conf. conf. conf. conf. na
na
Peru na
Hierro Peru pellet feed 18.94 19.75 19.28 21.14 25.08 43.01 51.18 56.04 .. na
na
South Africa (2) na
Kumba Resources (Iscor) fines 21.13 22.04 21.51 23.45 27.82 - - - - na
Kumba Resources (Iscor) lump 29.83 30.79 29.25 31.85 37.78 64.79 77.10 84.42 conf. na
Assmang fines 20.42 21.30 20.79 22.66 26.88 conf. conf. conf. conf. na
Assmang lump 29.47 30.42 28.90 31.47 37.33 conf. conf. conf. conf. na
na
Venezuela (2) na
CVG pellet feed 19.43 20.27 19.78 21.56 25.57 43.85 52.18 57.14 .. na

1) The table refers to the Japanese fiscal year, which starts 1st of A - : No sale, no price.
Unless specified otherwise, prices are on a FOB-DLT (dry long to.. : Price unknown.
2) DMT basis.

Source: The Tex Report.