Top iron ore exporter sees price dipping below $50 a tonne by 2019

The world's number one iron ore producer Vale is considering shifting from iron ore pricing based on the previous quarter’s prices to levels more aligned with the spot price the company's chief executive said on Tuesday. The Brazilian company's new willingness comes after more Chinese steel mills seek to postpone shipments or default on contracts as spot iron ore prices drop from historic highs above $170 to levels of around $150. BHP, Vale and Rio Tinto control nearly 70% of the 1 billion tonne annual iron ore seaborne trade and dominate price talks which in the past were characterized by secretive negotiations and annual contracts. Just last week global number one miner BHP Billiton announced plans to create a new, more transparent system for pricing iron ore called Global Ore by the end of the year or early next year.

Mining M&A is heating up with more takeover rumours, says The Australian, quoting a report from UK-based newspaper The Sunday Times. The Times reported that BHP Billiton (NYSE: BHP), the world's largest miner, is close to launching a $1.3 billion bid for Ferrous Resources, a Brazilian iron ore producer controlled by a number of international hedge funds including Philip Falcone's Harbinger Capital. According to The Australian, Ferrous is valued at some $3.9 billion, with the company "needing to spend about $5bn developing its Viga mine in Minas Gerais state in Brazil, which would include a 400km slurry pipe to carry the ore to its own port at Presidente Kennedy in nearby Espirito Santo state."

Despite bans on export of iron ore from India, the price of the steelmaking ingredient has fallen in China. Business Standard reports that the price of iron ore originating from India has dropped 12% in Chinese markets to $168 a tonne, compared to $191 a tonne two weeks ago. The website quotes the chairman of Maya Iron Ores, a commodities brokerage, saying that Chinese steelmakers and traders expect the market to drop even further due to global financial turmoil and reduced demand:

Fox Business reports global number one miner BHP Billiton plans to create a new, more transparent system for pricing iron ore called Global Ore by the end of the year or early next year, the chief executive of the company's Ferrous and Coal division said Thursday. BHP, Vale and Rio Tinto control nearly 70% of the 1 billion tonne annual iron ore seaborne trade and dominate price talks. The pricing of iron ore which have shifted from secretive negotiations and annual contracts over the last couple of years to prices linked to the spot market constitutes a “true revolution” say analysts. Firm demand from China's construction sector and a drop off in India's exports have been behind the strength in spot iron ore prices which, at above $170 a tonne, have trebled from late 2008. In August results for BHP Billiton showed its iron ore division accounted for the bulk of its record $22 billion in profits.

Rio Tinto, the world’s second- largest mining company, said third-quarter iron ore output and coking coal production reached record highs after recovering from disruptions caused by flooding in Australia earlier in the year and continued strong demand from Asia. Iron ore production increased to just shy of 50 million metric tons and hard coking coal production was 55% higher than the second quarter. Analysts say iron ore prices may climb above $200 a ton on the back of supply shortages while metallurgical coal have been trading at record highs of $330 during 2011.

Eldorado Gold (TSE:ELD) announced that it hit record production in the third quarter. Its three mines, Kisladag, Jinfeng, Tanjianshan and White Mountain, produced 179,195 oz in Q3 at a cash cost of $397/oz. The company also said that iron ore sales in the quarter totalled 170,781 tonnes at a realized price of US$122/tonne. "We are extremely pleased that all operating mines continue to perform in accordance with plan in terms of production levels and cash operating costs, which resulted in record quarterly production for the corporation," commented Paul Wright, President and Chief Executive Officer.

Centaurus Metals (ASX:CTM) slipped back to 72 cents after rising to 78 cents Thursday, on news of a positive resource estimate from its flagship Jambreiro iron ore project in Brazil. Perth-based Centaurus reported a 65% jump in iron ore from Jambreiro, to 117.5 million tonnes grading 26.8% Fe.

Brazil is offering a carrot to encourage domestic production of fertilizer while at the same time, reaching a little deeper into the pockets of iron ore miners. A Mining Ministry official from the South American powerhouse said Thursday that Brazil plans to boost taxes on iron ore while cutting the levy on fertilizers as part of a plan to overhaul mining regulations, Bloomberg reported: The government is studying a plan to double the royalty on iron ore to 4 percent of gross revenue from 2 percent of net sales now, Claudio Scliar, the ministry’s secretary for geology and mining, said today in an interview. The levy on fertilizers may be reduced from 3 percent to prompt producers to increase domestic output of the crop nutrients, he said, declining to specify the size of the cut.

Reuters reports that Albania is inviting bids for 151 mining licences this year, with 20 of them to be allocated through weekly competitions.