Speaking of dirt, more good news for the red earth of the Pilbara. While Woodside got all the press, Gindalbie (ASX:GBG) Metals signed itself an AU$1.8 billion deal with China yesterday too. Gindablie’s agreement with Anshan Iron and Steel Group will help the Aussie company develop its Karara magnetite and Mungada hematite projects in the mid-west region of Australia.”
Iron ore demand is expanding faster than BHP (ASX:BHP) and Rio Tinto (ASX:RIO) can keep up with. In fact, spot iron ore prices in India are currently around US$100, nearly 40% higher than the current contract price of US$63. China satisfies the demand for ore that can’t be met by Brazil and Australia by dipping its backhoe bucket into the Indian spot market. It tells you something about the nature of Chinese demand that Chinese steel producers are willing to pay a 40% mark up for the ore.
The annual iron ore contract is due to be renegotiated in April. Already there are whispers of at least a 20% increase and perhaps a 40% increase. In WA, these higher prices are making lower-grade ore bodies and projects further from existing infrastructure more economic. And with Chinese and Russian partners queuing up for a piece of the action, the iron ore juniors and the mining service companies are booming.
The Daily Reckoning Australia