Iron Mining Group Positioned as Answer to China Iron Ore Needs
As the largest importer of iron ore in the world and the producer of more than a third of the world’s steel, all eyes are on China’s steel industry to kick off 2011. The Chinese have not made it any secret that they are not happy with the big three iron ore produces of Vale, Rio Tinto and BHP Billiton who have been openly accused of a monopolizing iron ore prices for their own benefit with no regard to the steel producers in China. Additionally, it has been made clear that the Chinese are working to shore up their steel industry infrastructure, looking to develop additional domestic mines and looking to other suppliers of iron ore which are more readily available for negotiation. While the intentions are to avoid the reliance upon Vale, Rio and BHP, the fact remains that Chinese iron ore import experienced a growth of 25% in November from October.
Last week, the iron ore international quarterly price settlements for January to March period were increased again last week; up by about 8%. It has also been reported that the Big Three have asked China’s steel mill to hike the Q1, 2011 contract prices by 7.6%. With floods in Australia, iron ore export bans constricting supply from India and a high worldwide demand for iron ore, China will more than likely be exhausting resources to acquire iron ore at the best prices possible for the foreseeable future to lessen the pressure on the margins of its steelmakers.
Raw material costs for the top ten steelmakers rose to 45% of net sales for the September 2010 quarter; an increase of 3 percent over the same quarter the year prior. As big miners continue to hold pricing power, it is anticipated that the ratio is going to continue to increase throughout 2011.
Even with China raising interest rates in an attempt to curtail inflation, the steel industry is still strong. Some may debate that it is stabilizing, and that may be true, but the demand is still high given the sheer volume of steel that the Country produces year over year. Internal changes will take years to have implemented, so the answer could very well be to look to smaller iron ore miners to meet supply needs.
Iron Mining Group, Inc. (OTCBB:IRNN, “IMG”) is a company clearly positioned to capitalize on the situation. Through its wholly-owned subsidiary, Chile Inversiones de Minerales, Ltda., IMG has acquired a portfolio mineral concession believed to contain more than 150 million metric tons of recoverable high grade iron ore across both iron sands and bedrock deposits. Notable, IMG owns 40 mineral concessions spanning more than 18,000 acres in the Atacama desert. Furthermore, the Company owns 50% of the La Serena Iron Sands Mine with plans to increase ownership to 70% via repayment of pre-existing project debt through the iron ore sales from the property. Finally, IMG is working closely with the municipal authorities in the city of Tocopilla to clean a contaminated 2km beach and bay which contain rich natural iron ore deposits and have been the victim of decades of iron ore waste dumped at port by the country’s mineral exporters. Equally important, IMG controls two port development projects in Chile’s Coquimbo region and is working to acquire similar opportunities in the Atacama region, giving IMG an upper hand in the infrastructure restricted Chilean iron ore markets.
Production, which is slated to begin in the first quarter of this year at the La Serena project, has the potential sales of over $150 million in 2011 and an overall total in excess of $9 billion based on geology and feasibility studies completed by the University of Santiago in 2009. In total, at current market prices, these three projects hold total mineral value in excess of $21 billion to be exploited over a period of approximately 15 to 20 years.
The fact that Iron Mining Group can be quickly into production of the much-needed iron ore gives IMG a glowing appeal, but the Company has secured the sales of the iron ore already, which is what sets IMG apart from other mining companies and throws them right into the mix as a player in the industry. And guess where it is going…to China. IMG has signed strategic joint venture agreements with several Chinese Steel Groups, which provide guaranteed long-term iron ore purchase agreements for 100% of available production. It doesn’t take a geologist or a seasoned mining investor to realize that Iron Mining Group has worked to put itself into a position as an answer to a global supply/demand scenario where it is a win-win-win situation for IMG, China steelmakers and IRNN shareholders as the Company takes this one aspect of their many projects into production.