Iron ore price weakens as Australia flags return to sub-$100 prices
Futures dropped for a fourth day in Singapore, to trade about 3% lower for the week.
A fire at Anglo American Plc’s biggest metallurgical coal project in Australia halted production, with the miner saying it may take months for it to be extinguished. Anglo, which is seeking to sell the mine as part of a turnaround plan, fell as much as 4%.
A methane explosion on Saturday caused the fire at the Grosvenor underground mine, which accounts for about 30% of the company’s annual production of coking coal in Queensland state, Anglo said in an emailed statement Monday. No one was injured.
The blaze may complicate the London-based company’s plan to sell its assets that mine the steelmaking fuel, after it rebuffed a $49 billion takeover by BHP Group. After the world’s biggest miner walked away in May, Anglo chief executive officer Duncan Wanblad announced a radical overhaul and restructure of the business, with analysts anticipating a swift sale of the coal portfolio due to its relatively high value.
Anglo’s shares fell as much a 4% in London and traded 3.1% lower at 2,423.50 pence by 8:30 a.m.
“The mine team is working with specialist teams from the Queensland Mines Rescue Service and the regulatory authorities to extinguish the underground fire, prior to being able to assess the steps toward a safe re-entry into the mine,” Anglo said in the statement. “These procedures are expected to take several months as a result of the likely damage underground.”
The fire could mean the sale of Grosvenor and the nearby Moranbah North coal project — among Anglo’s five mines of the fuel in Queensland — will take longer than expected and the bidding price will be lower, Jefferies analyst Christopher LaFemina said in a note on Monday. The researcher had expected those two mines to fetch about $3 billion.
The expected cut to production due to the fire would weigh on Anglo’s share price and the asset sale, RBC Capital Markets analyst Marina Calero said in a note.
Grosvenor reached first output in 2016 but was closed in mid-2020 after an explosion which seriously injured five workers. It only returned to production in February 2022.
The coal beds Anglo mines contain a relatively high level of methane. Anglo drains approximately 60% of the methane gas from the seams and then supplies it to the Queensland electricity grid.
(By Paul-Alain Hunt and Victoria Cavaliere)
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