Iron Ore Price Rising Not Falling As A Commodities Rush Develops

The global commodities boom which has seen prices for copper, gold and silver reach all-time highs is feeding into basic raw materials such as iron ore, which is expected to price rather than fall, as had been widely predicted earlier this year.

The unexpected upturn has also encouraged mining giant Rio Tinto to push ahead with plans for big new mine in Western Australia with its joint venture partners, the Japanese trading house Mitsui & Co. and a private investor, Angela Bennett.

A decision announced earlier today to proceed with a $191 million feasibility study into the Rhodes Ridge mine is a key step in a planning process which is expected to lead a construction start in 2029 and first ore in the earlier 2030s.

The new mine will become one of the world’s biggest, with an initial production target of between 40 and 50 million tons of high-grade iron ore a year and the potential to grow into a project producing 100m/t a year.

Perhaps more importantly, Rhodes Ridge is an example of increasing competition between Asian countries for reliable supplies of minerals and metals.

In the case of Rio Tinto, strong demand for iron ore has enabled it to work in a joint venture with Chinese companies at the new Simandou mine in the Africa country of Guinea, and a Japanese partner in Australia.

Underpinning both business ventures is an iron ore price remaining above $100 a ton despite multiple forecasts of a fall to as low as $75/t, and a deepening political and diplomatic divide between east and west which is encouraging the development of new and independent supply chains.

Sydney-based stockbroking firm Barrenjoey last week repeated its earlier iron ore price forecast of $100/t for next year, but made a modest $3/t increase in its price forecast for 2027 from $95/t to $98/t.

After Simandou

The improved outlook is partly a result of a strengthening global economy and the ability of the market to absorb ore from Simandou which will not reach nameplate capacity until 2028, after which a window of opportunity will start to open for new mines such as Rhodes Ridge.

Direct Japanese interest in Rhodes Ridge, while not openly promoted as a way of ensuring future iron ore supply from a non-Chinese source, follows a landmark deal earlier this year between Mitsui and the heirs to assets left by the late Peter Wright.

For an upfront payment of $5.2 billion Mitsui acquired a 40% stake in the mine from Wright’s sister Angela Bennett and two of his children, Leonie Baldock and Alexandra Burt, cementing their places on the list of richest Australians.

While Baldock and Burt have sold their entire interest in Rhodes Ridge to Mitsui, Bennett has retained a 10% stake. Rio Tinto owns 50% and has management control.

In today’s feasibility study announcement, Rio Tinto said that as well as initiating the study the joint venture would invest $146 million over the next three years on iron ore exploration in the region.

First ore from Rhodes Ridge, which is estimated to contain 6.8 million tonnes of ore, is expected to come from the northern end of the deposit which is closest of existing rail, port and power infrastructure.

If eventually expanded to 100m/t a year, Rhodes Ridge will be similar in size to Simandou which had been seen as a threat to the Australian iron ore industry, but which is now seen as a timely addition to global supply.