Tonogold Resources Inc (TNGL)

[joeblow110percent]

Falling IO prices hurting Chinese companies (BLOOMBERG)

“Rio Tinto Group and BHP Billiton Ltd., two of the world’s biggest iron ore producers, are benefiting as falling iron ore prices pressure smaller rivals in China to shut down.”

“The closures are helping Rio Tinto and BHP which, along with Vale SA, already control about two thirds of global seaborne supply from their low-cost mines.”

“It’s the right time for BHP and Rio to seize the opportunity to boost their market share.”

“Almost 70 percent of the ore processing companies have also closed.”

Prices Retreating

“Rio Tinto Chief Executive Officer Sam Walsh said this month a drop in the price to about $80 would see a lot of his competitors “disappear.””

Still Superstars

About 80 percent of China’s mines have operating costs at around $80 to $90 a ton, according to the Shanghai-based consulting firm Mysteel.com. That compares with $44 for Rio Tinto, $53 for BHP, $68 for Vale and $77 for Fortescue, according to estimates from UBS AG.

He estimates China will produce 370 million tons of seaborne grade equivalent ore this year and that more than half of its $40 billion industry is under threat.

“We expect an extra 250 million tons to be displaced and for high cost Chinese domestic mines to permanently close,” Deutsche Bank’s Young said in the June 16 report.

Demand Growth

The displacement of marginal Chinese supply has begun as prices retreat, Goldman Sachs Group Inc. said June 3. Mines with as much as 100 million tons of output may close this year, according to Australia & New Zealand Banking Group Ltd.

“The majors are probably thinking they are well placed to take care of that market, they can increase production if other producers fall by the wayside,” James Wilson a Perth-based analyst at Morgans Financial Ltd., said by phone.
©2014 Bloomberg News

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