Mothballed NT iron ore mines reopen mid soaring demand for steel in China

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Mothballed NT iron ore mines reopen mid soaring demand for steel in China

As Chinese demand for steel soars and prices sit at a seven-year peak, Northern Territory iron ore miners are making a comeback. In the past few months, two mothballed mines have restarted operations and are projected to be in full supply in 2021.

Iron ore is one commodity that one market analyst says will likely stay unaffected in the on-going China-Australia trade dispute. (Supplied: Nathan River Resources)

As trade tensions between Beijing and Canberra increase, the revival of the NT's iron ore sector comes as Chinese demand pushes prices above $US135 a tonne. "We need to be very careful, and I think there's reason to be concerned, but the fundamental reality is that China's reliance on imported iron ore is very high and rising," said Philip Kirchlechner, an iron ore market analyst.

REOPENING MINES MOTHBALLED

The Roper Bar mine, located approximately 600 kilometers southeast of Darwin, and the Frances Creek mine, located 200 kilometers south of Darwin, both shut down after the price of iron ore plummeted below US$90 a ton in 2014.

In 2017, Nathan River Resources, a private company subsidiary of the British Marine Group, bought the Roper Bar mine and has restarted mining in the last six weeks.

Stefan Murphy, CEO of Nathan River Resources, said the mine would boost production by up to 1.5-2 million tonnes per year, and operations would create 250 jobs. "We're tracking, at the moment, at around 70-80 per cent NT employment and 20 per cent Indigenous employment," he said.

Last month, the company's maiden export to China left its load-out facility at the port of Bing Bong on the Gulf of Carpentaria and is currently planning a second shipment. In the next three years, the initial aim is to mine 6 million tonnes while seeking new reserves and downstream processing opportunities that can push the life of the mine to 20 years.

A $250 million investment in infrastructure and properties, Mr Murphy said, meant that the mine could withstand potential price fluctuations. We have approached the project because we want to be able to supply US$60 a tonne to China,"We've approached the project in that we want to be able to deliver into China for $US60 a tonne,"

The Frances Creek mine is now operated by Darwin-based NT Bullion and is making its first export shipment of stockpiled ore left by Territory Iron, previously owned, by the end of the year. The company recently entered into an agreement with Anglo American, the multinational mining giant, to sell iron ore from the Frances Creek mine to foreign customers. After the stockpiled ore has been sold, NT Bullion plans to resume mining at Frances Creek early next year.

RELIANCE ON AUSSIE IRON ORE BY CHINA

The restart of these mines comes at a delicate time when the relationship between Australia and China, the world's largest purchaser of iron ore, is apparently souring. Commodities were the victims of trade wars, such as barley, wine, and poultry.

Mr Kirchlechner, the director of Iron Ore Research and a member of the Australia China Business Council, said, however, that the trade in iron ore would most likely be unaffected because China was increasingly dependent on imported iron ore.

"For the calendar year we're looking at another year of record [Chinese] steel production exceeding 1 billion tonnes, and that is why the iron ore price has continued to strengthen," he said. According to Mr. Kirchlechner, Xi Jinping has ordered a "inward turn" and an emphasis on China's domestic economy to soften the blow of the US trade war and, more recently, the Covid-19 pandemic.

Mr. Kirchlechner said that the policy had sparked new investment in construction and infrastructure and that Australia, the largest producer of iron ore in the world, wanted to meet the new demand.

"China now has to import 70 per cent of its iron ore requirement, so China is now not only the biggest user of iron ore in the world but the biggest importer of iron ore in the world," he said. "It is because of Australia's production that China enjoys a very low-cost platform for its urbanisation policies, which is absolutely necessary for developing its own economy, so without Australian iron ore, China would have a big problem."

Mr Murphy is hopeful that an alternative demand can be sought for the iron ore at the Roper Bar mine if iron ore is dragged into the fray of trade tensions.