Engineering & Mining Journal

FEB 2019

Engineering and Mining Journal - Whether the market is copper, gold, nickel, iron ore, lead/zinc, PGM, diamonds or other commodities, E&MJ takes the lead in projecting trends, following development and reporting on the most efficient operating pr

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Page 73 of 75

72 E&MJ • FEBRUARY 2019 MARKETS The tragic collapse of the tailings dam at Vale's Corrego do Feijão iron ore mine near Brumadinho, Brazil, caused global spot prices for iron ore to move higher. According to the E&MJ Price Index, iron ore prices on February 1 settled at $86.93 per dry metric ton (dmt), a $17.73/dmt (25.6%) increase over the 2018 year-end price of $69.20/dmt. Speculators thought prices could eventu- ally top $100/dmt. While the Feijão mine itself represents only 2% of Vale's 390 million mt per year (mt/y) production, the dam failure will have a signifi cant impact on Vale's ability to produce iron ore. The company has al- ready mentioned production curtailments while it inspects other upstream dams. The Feijão tragedy may also impact Vale's ability to bring the Samarco mine back online, which suffered a similar cata- strophic failure in 2015. The potential liabilities from the Fei- jão dam's collapse prompted Moody's to place Vale's senior unsecured ratings on review for downgrade. "We expect [the Feijão dam failure] to raise environmen- tal, administrative, criminal and civil lia- bilities, on top of serious reputational risk for the largest iron ore producer globally," Moody's Investors Service said in its most recent Credit Outlook. Vale expected Samarco to resume pro- duction in 2020 albeit at a limited ca- pacity. When Samarco went down, it took with it more than 30 million dmt from the market. This caused a similar increase in iron ore pellet pricing for the Atlantic market, which has been sustained for the past few years. One of the biggest benefi ciaries for in- creasing prices in the Atlantic market would be Cleveland Cliffs. Any further supply side disruptions for high grade fi nes, pellet pre- mium pricing in the Atlantic market could also increase. The 2019 Atlantic market pellet premium negotiations were nearing completion or had been completed at the time of the Feijão dam failure, so there will likely be no impact for 2019. Many ana- lysts believe that pellet premium prices for 2020 and beyond could be infl uenced to- ward the upside for the Atlantic market. Dam Failure Pushes Iron Ore Prices Higher By Steve Fiscor, Editor Gold and silver prices provided by KITCO Bullion dealers ( Platinum group metals prices provided by Johnson Matthey ( Non-ferrous base and minor metal prices provided by London Metal Exchange ( Iron ore prices provided by Platts Iron Ore Index. Currency exchange rates were provided by (February 1, 2019) Precious Metals ($/oz) Base Metals ($/mt) Minor Metals ($/mt) Exchange Rates (U.S.$ Equivalent) Gold $1,317.10 Aluminum $1,872.50 Molybdenum $26,000 Euro (€) 1.147 Silver $15.87 Copper $6,097.50 Cobalt $34,000 U.K. (£) 1.309 Platinum $830.00 Lead $2,093.00 Canada ($) 0.764 Palladium $1,372.00 Nickel $12,460.00 Iron Ore ($/dmt) Australia ($) 0.726 Rhodium $2,510.00 Tin $20,830.00 Fe CFR China $86.93 South Africa (Rand) 0.075 Ruthenium $270.00 Zinc $2,732.50 China (¥) 0.148 Source: Markets Insider

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