No end to the boom times for big three


Last week, a host of iron ore production numbers were announced by ASX listed companies, led by the big three in the iron ore sector - BHP, Rio Tinto and FMG.

Once again these companies reported either record, or close to record production for the quarter, showing things aren't slowing in the iron ore space just yet.

Today, I thought it would be worth having a look at exactly who is producing what in the State's iron ore space.

Now each company reports its data in a slightly different manner so at times it is difficult to compare apples with apples, however the data below should give you a fair idea of the scale that each of these companies is working on.

The leading producer is still Rio Tinto, with the company producing 62 million tonnes of iron ore from their Pilbara operations in the fourth quarter.

Due to a number of joint venture arrangements in the region only 49 million tonnes of this is attributable to Rio Tinto.

For the full year (January to December 2011) 231 million tonnes was produced from Rio Tinto associated Pilbara operations, of which 184 million tonnes was attributable to the company.

Rio is continuing to expand its Pilbara operations, aiming to ramp up to 283 million tonnes per annum by the end of 2013.

On top of this Rio still holds one of the largest undeveloped iron ore deposits in the world, the massive Simandou iron ore project in Guinea, which is scheduled for first production in 2015.

BHP is next in the WA iron ore production hierarchy, producing 41 million tonnes in the December quarter.

This puts BHP a little ahead of their full year production forecast of 159 million tonnes per annum.

BHP is also continuing its aggressive iron ore expansion plans after late last year approving a new mine, to be known as Orebody 24, 10km north-east of Newman.

Initial mining at Orebody 24 is expected to start in the second half of 2012, with the mine to have a capacity of 17 million tonnes per annum once fully operational.

The most talked about stock in the iron ore sector, FMG, comes in a distant third on the list having shipped 15 million tonnes for the quarter, at an annualized run rate of 59 million tonnes per annum.

FMG continues to run above its nameplate capacity of 55mt per annum and is aggressively expanding the Solomon Project, which aims to increase FMG's capacity to 155 million tonnes per annum.

FMG's average cost of production for the quarter was $US46.43 per tonne, with an average sale price of US$122 per tonne.

From the above numbers you can see that despite the iron ore price falling significantly over the course of the last six months (in the June quarter of 2011 FMG received an average price of $158/tonne for their iron ore) there are still strong margins for iron ore producers at present.

As number four in the WA iron ore space I would have liked to include Atlas Iron's December quarter production figures here, unfortunately they have not been released to the market at the time of this article going to print.

Based on Atlas's September quarter production and December quarter forecasts they are expecting to ship 1.5 million tonnes in the December quarter, totalling production of 6 million tonnes per annum.

To put this all in perspective, currently Rio Tinto accounts for about 51 per cent of WA's iron ore production, BHP contributes 34 per cent , 13 per cent comes from FMG and 2 per cent from Atlas Iron and other small producers including BC Iron, Gindalbie Metals and Mount Gibson Iron.

_Information contained in this article does not consider your personal circumstances. You should consult a stockbroking professional before making any investment decisions. Sentinel may hold positions in stocks discussed from time to time. _

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