CONFÉRENCE DES NATIONS UNIES SUR LE COMMERCE ET LE DÉVELOPPEMENT

UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT

TRUST FUND ON IRON ORE INFORMATION

IRON ORE MARKET 2008-2010

Geneva, June 2009

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CONTENTS

Page SUMMARY 4 I. THE IRON ORE MARKET IN 2008 7 II. STEEL IN 2008 21 III. COUNTRY INFORMATION 25 IV. COMPANIES IN THE GLOBAL IRON ORE INDUSTRY 49 V. PROJECT REVIEW 62 VI. THE OUTLOOK FOR 2009 AND 2010 86 VII. SOME COMMENTS ON THE STATISTICS 91 ABBREVIATIONS 93 SOURCES 95 ANNEX TABLES Table A1. Iron ore: World production (Mt) 96 Table A2. Iron ore: World exports (Mt) 99 Table A3: Iron ore: World imports (Mt) 101 Table A4: Pellets: World capacity, production and exports (Mt) 103 Table A5: Brazil: Iron ore monthly exports (Mt) 104 Table A6: China, Taiwan province of China: Iron ore monthly imports (Mt) 105 Table A7: Japan, Republic of Korea: Iron ore monthly imports (Mt) 106 Table A8: Iron ore: Prices to Europe 107 Table A9: Iron ore: Prices to Japan 109 Table A10: Iron ore: Representative spot freight rates (US dollars/t) 111 Table A11: Direct reduced iron (DRI): World production and capacity (Mt) 114 Table A12: Pig iron: World production (kt) 115 Table A13: Crude steel: World production (kt) 117

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SUMMARY The steel industry is facing its worst demand downturn since the oil crisis of 1974-1975 and the iron ore market is of course affected. The main reason for the fall in steel demand is that steel is a key input in the construction, mechanical engineering and transport vehicle industries, sectors that are among the hardest hit in the current global economic recession. Price negotiations for iron ore were again drawn out and were not completely concluded at the time of writing. The benchmark pricing system is under attack and its future looks bleak. World use of finished steel products decreased in 2008 by 1.4 % to 1,197 Mt. Steel use fell in the developed world, which entered recession earlier, while it continued rising in most developing countries. In China, steel use increased by 2.9 %, and increases were also recorded in other Asian countries and in Latin America. The recession has also led to a very large slowdown in trade. Following a strong performance in the first nine months of 2009, the volume of world trade in steel (average of exports and imports) declined by 20 % in the fourth quarter from a year earlier. The reaction of steel trade in the current cycle has been much stronger than during the past episodes of weak demand. This is the result of exporters’ reduced access to credit to finance shipments and the intensity and scope of the current global demand contraction. World crude steel production decreased by 1.5 %, from 1345 Mt in 2007 to 1325 Mt in 2008. All regions except Asia experienced falls in production. In Europe, production fell by 6.4 per cent and Africa experienced a decrease of 8.8 per cent. In the Americas production declined with 4.9 % and in Oceania, production was reduced by 4.1 %. Production in China increased by 1.9 per cent and the rest of Asia increased its production by 0.8 %. In spite of falling demand in the final quarter, world production of iron ore grew by 3.6 % in 2008 to reach more than 1.7 billion tons. Output decreased in most countries but the fall was more than offset by increases in the major producing countries, including Brazil, Australia, South Africa and India. Developing countries accounted for a little more than 62 % of world iron ore production in 2008 (almost exactly the same as in 2007), the CIS republics for 11 % and the industrialised economies for 27 %. The share of the CIS republics declined slightly from 12 % in 2007. The increase for the industrialised economies was due mainly to growth in Australia. China produced 366 Mt (on a comparable grade basis), or 21 % of total world production in 2008, down from 22 % in 2007. This makes China the largest producer in the world, more than 15 Mt ahead of Australia. International iron ore trade also reached a new record level in 2008 as exports increased for the seventh year in a row and reached 882 Mt, up 7.8 %. Total iron ore exports have doubled since 1999. Brazil’s exports increased by 4.5 % to 282 Mt in 2008. The increase was smaller than last year and pushed Brazil back again to second place among iron ore exporting countries. With over 300 Mt and an increase on 2007 of 16 %, Australia is now again exporting more iron ore than Brazil. Indian exports grew for the ninth consecutive year and the country is now, at 101.4 Mt, the third most important exporter. China is still by far the world’s largest iron ore importer. In 2008, its imports were 444 Mt, an increase by 16 % compared to 2007. Japan’s imports increased by a comparatively modest 1.1 % to 140 Mt. European imports (excluding the CIS countries), which fell by 5.0 % in 2008, reached 164 Mt, corresponding to 18 % of world imports. Seaborne iron ore trade is estimated to have increased by 7.4 % in 2008 to 845 Mt. The first three quarters were characterized by very strong growth, which turned into a precipitous decline in the final three months of the year, as steel producers slashed production and raw material purchases. Freight rates peaked at a

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record level in May 2008, following which they declined. The decline, which was initially due to significant numbers of new ships being delivered, was slow at first and steepened when freight demand collapsed in the autumn of 2008 as a result of the financial crisis, which led to a freeze in trade finance. In late 2008, freight rates had fallen to a low not experienced since the early 2000s. The international freight market will remain depressed this year and maybe for several years to come. In 2008, production of pellets reached 317 Mt, 3 % less than in 2007. This reflects the fact that pellet production was hit harder than other iron ore production in the end of 2008 when the financial crisis hit. The 2009 price negotiations have been very drawn out and at the time of writing in mid-June they are still not concluded. While the “Big 3” producers, Vale, Rio Tinto and BHP Billiton, have all reached agreements with some of their customers, no deals have yet been made with Chinese steel companies. The Japanese steel industry continued to be first to sign when Nippon Steel concluded the first agreement with Rio Tinto on 26 May. The partied agreed on a decrease in the price of fines with 33 % and the price of lump ore with 44 %. The agreement was accepted as a benchmark price by BHP Billiton which signed its first agreement, with Japanese JFE, on 12 June. Meanwhile, Vale had settled for a 28.2 % reduction in the price of fines and a cut of 44.47 % in the price of lump ore. The smaller reduction for Brazilian ore reflects the elimination of the Australian “freight premium” that was obtained in 2008, and which had lost its justification with the fall in freight rates. The final outcome of negotiations for prices to China is still uncertain. It is possible that there will be no agreement at all – which would not be totally controversial as a large portion of Chinese imports is already traded on a spot basis – but it may be more likely that agreement will be reached at the rates already negotiated with the producers by other Asian steel makers. As a result of the onset of recession, spot prices in China for imported ore fell from a monthly average of 1570 RMB/t in July for 63.5 % Indian fine ore at Tianjin port to 590 RMB/t in October. The benchmark pricing system is under fierce discussion and its future is uncertain, to say the least. A new price setting mechanism will however not be introduced overnight. Instead, it will take several years to find a new model and probably there will be several models in use in parallel. The market share of the "Big Three" decreased to 34 % in 2008. They have not managed to increase their production quite as fast as total world production, mainly because of a fast expansion by small producers in India and China in 2005-2007 and in late 2008 also because of cuts in production. The level of concentration has thus been more or less constant during the last couple of years. To measure corporate control at the production stage underestimates the concentration of the iron ore sector since large parts of total production do not enter the market due to vertical integration. An alternative is to look at the share of the seaborne trade. Measured this way, the shares of the major companies are considerably higher. Vale alone controls 33 % of the total world market for seaborne iron ore and the three largest companies control 69 %. This number is quoted by those who argue that the concentration risks leading to control by major

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producers over prices, particularly under the present benchmark negotiating system. While the proposed merger between BHP Billiton and Rio Tinto failed, it was announced in early June 2009 that Rio Tinto and BHP Billiton had entered into a non-binding joint venture (JV) agreement covering the entirety of both companies iron ore operations and infrastructure in Western Australia. This agreement has also raised concern in some quarters about the growing bargaining power of the large producers. The trend on the part of steel producers towards creating a network of captive mines, both iron ore and coal, which started in the CIS, has strengthened. The largest steel producer, Arcelor Mittal, has built a strong holding in the iron ore sector and more steel works will certainly follow suit. New iron ore mining capacity taken into operation in 2008 was reported to be about 88 Mt globally, a lower figure than in 2007. The total project pipeline contains more than 430 Mt of new production capacity to come on stream between 2009 and 2011. Of this total, around 172 Mt falls into the category “certain”, 54 Mt “probable” and 204 Mt “possible”. About 73 % of the projects labelled as certain are in Australia. South America has 6.9 % of the certain projects and Africa accounts for 7.5 % of the certain projects. While West Africa is making a reappearance as a potential iron ore producer the only project labelled certain in that region is in South Africa. The World Steel Association forecasts a fall in steel use by almost 15 % in 2009. It can be characterized as relatively cautious, since there are signs that the impact of China’s very large stimulus package may be sufficient to yield positive growth in steel use in that important country. Similarly, the composition of macro-economic stimuli in other countries, with an emphasis on construction and support to the transportation industry, is such that the measures are likely to have a positive effect on steel demand. When analysing probable developments over the medium term, this report has usually utilized a type of gap forecast, comparing projected capacity, based on investment plans, with assumptions about steel production. This approach is less useful in the present situation. The world iron ore industry is operating far below capacity. Even under the most optimistic assumptions about steel production, demand for iron ore will surely be lower in 2009 than in 2008. It is clear that the present oversupply situation will not go away soon. There are, however, two important factors that affect the outlook, although they do not eliminate the supply overhang. The two factors are expected low freight rates and high costs in Chinese iron ore mines. The small and medium size Chinese producers will most likely be forced to substantially reduce their output, particularly since they are no longer protected by high freight costs for imported iron ore. It is estimated that half the Chinese iron ore mining industry is at present operating at a loss.

In the medium term, it is likely that contract prices will stay at a level corresponding to that of current spot prices, that is, US$ 70/ton of landed ore in China. A consequence of this price shift will be a shakeout of Chinese iron ore mining. The effect of the price fall will be reinforced, as far as the Chinese mines are concerned, by rising costs for health and safety measures, environmental management and rising energy prices. As domestic production in China falls, the potential slack will be taken up by new investment, particularly by “the big 3”. This will allow the industry in the rest of the world to maintain operating rates that

generate a contribution to fixed costs, although they will not produce at full capacity.

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I. THE IRON ORE MARKET IN 2008

IRON ORE PRODUCTION, EXPORTS AND IMPORTS

Production

World production of iron ore grew by 3.6 % in 2008 to reach more than 1.7 billion tons. This was a seventh consecutive all time high. Output decreased in most countries but the fall was more than offset by increases in the major producing countries, including Brazil, Australia, South Africa and India (see figure 1 and annex table A1). Developing countries accounted for a little more than 62 % of world iron ore production in 2008 (almost exactly the same as in 2007), the CIS republics for 11 % and the industrialised economies for 27 %. The share of the CIS republics declined slightly from 12 % in 2007. The increase for the industrialised economies was due mainly to growth in Australia. China produced 366 Mt (on a comparable grade basis), or 21 % of total world production in 2008, down from 22 % in 2007. This makes China the largest producer in the world, more than 15 Mt ahead of Australia.

Since 1999, total growth of the iron ore market has been 95 % or 840 Mt. More than 78 % of this growth occurred in the last five years and 61 Mt in 2008. In developed market economies (including Eastern Europe), except Australia and Sweden, iron ore production fell by 6.6 % during the same period. Australian and Swedish production grew, however, by respectively 130 % and 26 %. In the CIS republics, iron ore production in the same period increased by 37 %. However, production in these countries still has to reach the record levels of 250 Mt that were attained in the mid-1980s, despite some recovery in recent years. In Western Europe production seems to have bottomed out and production has been a little shy of 30 Mt for the past couple of years; Swedish production decreased by 3.5 % in 2008, while in other

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producing countries such as Austria and Bosnia-Herzegovina production was stable. Thus the European share of world production is falling. In North America, production is stable at 85 – 90 Mt. The United States actually saw a slight increase in production in 2008 but Canadian operations slowed down. Iron ore production in China was roughly stable in 2008 and reached 366.0 Mt. Among the larger producers, Australia had the fastest growing iron ore industry in 2008 with a growth rate of 17 %. India’s growth rate was 3.4 % and Brazil’s iron ore production increased by 2.8 %. In the CIS, Kazakhstan's production decreased by 4.6 %, Russia's by 4.9 % and Ukraine saw a downturn of 7.4 %. Production for 2008 in Africa increased by 11 %, mainly because of an increase in South African production of 18 %. The two most important producing countries in Africa, South Africa and Mauritania, accounted for roughly 94 % of the continent’s production.

Iron ore trade International iron ore trade also reached a new record level in 2008 as exports increased for the seventh year in a row and reached 881.8 Mt, up 7.8 %. These figures include all export trade including intra-CIS trade. The major developments in iron ore exports and imports for the year 2008 by area are shown in figures 2 and 3 and in annex tables A2 and A3.

Total iron ore exports have increased by approximately 98 % since 1999. Exports by developed market economy countries excluding Australia have increased by 20 %, while

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exports of Australia have increased by 110 %. Exports of the CIS republics (including intra-CIS trade) rose by 101 % between 1999 and 2008. Developing countries accounted for 51 % of total iron ore exports in 2008, and their exports have grown by 110 % since 1999. Developed market economy countries accounted for 42 %. Of world exports and the CIS republics for the remaining 7 %. Brazil’s exports increased by 4.5 % to 282 Mt in 2008. The increase was smaller than last year and pushed Brazil back again to second place among iron ore exporting countries, after it had advanced to first place in 2007. With over 300 Mt and an increase on 2007 of 16 %, Australia is now again exporting more iron ore than Brazil. Indian exports grew for the ninth consecutive year and the country is now, at 101.4 Mt, the third most important exporter. South Africa, Canada, Russia, Ukraine and Iran follow, each with exports at 25-35 Mt. Swedish exports reached 18 Mt, a decrease from 2007. In Africa, Mauritanian exports decreased by 7.2 % in 2008, while South African exports rose by 8 %. For Kazakhstan and Russia, the last couple of years proved successful with regard to iron ore exports, but in 2008 exports from both countries decreased. Exports from Ukraine, on the other hand, increased by 5.4 % to 22 Mt. Exports to China increased for all three countries. These exports began in 2004 and have increased every year since. In 2008, total exports from the three countries to China increased by approximately 30 % to reach some 14 Mt. Russian exports to China were more or less stable, while Kazakh exports increased by 20 % and Ukrainian exports almost doubled. Transport capacity is a limiting factor for expansion.

In 2003 China passed Japan as the world’s largest iron ore importer. In 2008, its imports were 444 Mt, an increase by 16 % compared to 2007. Japan’s imports increased by a comparatively modest 1.1 % to 140 Mt. Together with the third and fourth largest importer, Germany and

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the Republic of Korea, these countries accounted for around 75 % (678 Mt) of total world imports. In 2007 the figures were 74 % and 614 Mt. European imports (excluding the CIS countries), which fell by 5.0 % in 2008, reached 164 Mt, corresponding to 18 % of world imports. In Europe, Germany is still by far the largest importer at 44 Mt, a 4.1 % decrease from 2007. France imports a little less than half as much, and the only remaining countries with imports exceeding 10 Mt are Italy, the United Kingdom, Belgium/ Luxembourg and the Netherlands. Canadian imports rose by 28 % to 9 Mt while United States imports remained the same as last year, also at 9 Mt. As a group, developing countries accounted for 55 % of total iron ore imports in 2008. Due to the strong growth in Chinese imports, the developing world’s share of total imports increased from only 31 % in 2002 to 46 % in 2005, 50 % in 2006 and 53 % in 2007. The CIS republics do not yet import iron ore from outside the CIS, and their internal trade was about 1.7 % of the world total. Given Russian overseas projects imports from the rest of the world will soon be a fact. Developed market economy countries account for about 43 % of world imports. The structure of iron ore imports has changed considerably since 1990. Then, Europe was the dominating import region, with 47 % of total imports (including Eastern Europe). Japan followed at 31 %, North America accounted for 6 % and China for only 3.5 %. In 2008 European imports corresponded to only 20 % of world imports. Most of the decline is due to the fall in East European imports, but in recent years the situation seems to have stabilized and the tremendous growth of the Chinese industry is now a main reason for Europe’s falling importance as importer of iron ore. If trade among CIS states is not included the figure is even lower, at 18 %. Japan's share of world imports is now down to 15 %. The importance of North American imports has also decreased and their part of world trade is now 2.0 %. On the other hand, the growth of Chinese iron ore imports have been staggering. In 2008 China alone accounted for 49 % of world iron ore imports.

Developments in early 2009 From developments in the first few months of 2009 it is clear that this year will see a decrease of iron ore production compared to 2008, although Chinese demand has been unexpectedly dynamic. With demand in developed countries falling, China, which has been the main engine behind the output growth during the past years, will see its share of world iron ore demand rising. Chinese crude steel production during the first three months of 2009 was 126.7 Mt, compared to 125.7 Mt for the same period in 2008, an increase by 0.8 %. Imports of iron ore in the first quarter were up by 19 % to reach 131.5 Mt compared to 110.7 Mt in 2008 (see table 1).

Table 1. China monthly imports of iron ore (Mt)

Change

2000 2008 2009 09/08 %

Jan 5.8 36.8 32.7 -11

Feb 4.9 38.2 46.7 22

Mar 6.3 35.7 52.1 46 Source: China Iron and Steel Association (CISA)

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According to CISA and Baosteel Group, China produced some 500 Mt steel out of a total capacity of 650 Mt. This indicates the magnitude of the problem of excess capacity. The Government of China is also reported to have ordered commercial banks to cut or even halt loans to steelmakers with low efficiency. Whether this will help or not is hard to say. High cost producers are suffering at the present but small mills capable of quick changes have a certain advantage compared to their larger competitors. The crude steel production forecast for 2008, based on official production plans according to CISA is between 460 - 500 Mt. That would be a change of about -8 % to 0 %. If the amount produced during the first three months is multiplied by four we get an estimated production of 507 Mt. These figures suggest that the official forecast may be overly cautious and that iron ore demand for China in 2009 could be more or less the same as in 2008. Considering that a lot of the Chinese iron ore mines operate close to the margin, some mines will have to close now that prices of imported iron ore are falling and domestic demand contracts. Imports of iron ore into China are likely to increase slightly in 2009 Japanese iron ore imports in the first three months of 2009 were 22.6 Mt, compared to 34.6 Mt one year earlier. Brazilian exports were 51.6 Mt for the first quarter of 2009, 20 % down from 2008. Vale's (CVRD's) shipments for the first quarter of 2009 amounted to 52.1 Mt, down 5.1 % compared to the fourth quarter 2008 and 32 % lower than the same period last year. Exports of iron ore from the Australian ports of Esperance, Yampi Sound, Geraldton, Walcott, Latta, Whyalla, Hedland, Dampier and Darwin were 50.1 Mt during the months of January and February 2009, up 4.8 % compared to 47.8 Mt in 2008. BHP Billiton reduced its iron ore production in the first quarter of 2009 to 28.2 Mt, less 1 % compared to the same period in 2008 and 4 % compared to the fourth quarter of 2008. Rio Tinto’s share of iron ore production from the mines it manages was 31.6 Mt in the first quarter 2009, unchanged from the last quarter of 2008, but down by 15 % from the same period last year. Fortescue Metals Group Ltd (FMG) produced 6.5 Mt of iron ore, a decrease of 23 %, compared to the fourth quarter of 2008, while shipments were 6.2 Mt, down 1.8 %. FMG loaded its first vessel with iron ore bound for China in May 2008. Canada reported exports of 3.2 Mt of iron ore during the months of January and February 2009, a decrease of 10 % compared to the same months in 2008. In the United States production was 5.9 Mt in the first quarter of 2009, a decrease of 30 % compared to 2008. Cleveland-Cliff produced 4.0 Mt of these, a decrease of 25 %. The company is presently operating at 50 % capacity at its mines in North America. In the CIS states, SeverStal produced 3.8 Mt of crude steel during the first quarter, down 21 % compared to the same period last year, and roughly 0.6 Mt of iron ore for sale to third parties, down by 62 %. Total production of iron ore for Severstal in the first quarter was 2.6 Mt, down 32 % from 2008. Ferrexpo produced 8.6 Mt of iron ore during January to April, down 9.5 % from last year and the company’s pellet production was 2.6 Mt, down 14 % compared to the same period last year. Kumba Iron Ore in South Africa experienced a fall in production by 3.4 % in the first quarter compared to the last quarter of 2008, but 14 % growth compared to the same period last year. The increase was reported to be due to increased exports to China. Sweden’s state owned mining company LKAB also experienced slower sales in the first quarter of 2009. Production reached 3.7 Mt, down 33 %. Deliveries were 2.9 Mt, down 46 %,

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and stocks rose by 100 % to 3.2 Mt. In early June, however, LKAB announced that a planned 12 week maintenance stop will be reduced to 8 weeks as a result of new orders from China.

PELLETS In 2008, production of pellets reached 317 Mt. This was somewhat lower than the 2007 record of 326 Mt. In per cent the change was a decrease of 3.0 %. This reflects the fact that pellet production was hit harder than other iron ore production in the end of 2008 when the financial crisis hit. World exports were 137 Mt, a decrease of 2.9 % compared to 2007. Figure 4 and annex table A4 show developments in world pellets production over the last ten and five years respectively.

The share of pellets in total iron ore production in 2007 was 20 %, but in 2008 the share fell to 18 %. The share was 26.8 % in 1997 and has decreased steadily since then. A major factor behind this slow decrease in the share of pellets in world production has been the decline in United States iron ore output (pellets account for a large share of blast furnace feed in the United States). This trend seems to have halted in recent years, however, and there are some signs that pellets production in the United States has leveled out. Worldwide, several new pellet plants are being planned or are under construction. Quite a few of them have however been idle since the global financial crisis hit. The share of pellets in total iron ore exports has declined steadily since the peak of 2000, when it reached 21.3 %. In 2008 the figure was 15 %, slightly down from 2007. The share in 2009 is bound to go down further as steel makers trying to reduce production capacity without having to close down blast furnaces resort to using less productive feed such as sinter fines instead of pellets.

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The leading role of the United States in pellets production has been challenged by Brazil during the last couple of years. However, Brazilian production decreased by 7.7 % in 2008, while in the United States it increased by 1.0 %. There is still considerable uncertainty about Chinese pellets production, but it is believed to have grown swiftly over the last couple of years, to reach an estimated 40 Mt in 2008. In 2007, according to the TEX report, new capacity of around 5.2 Mt were being planned or constructed at Zhuhai Gandong and Ying Kou. Those pellet plants would be ready sometime during 2008. It is however difficult to say when they will actually enter production. Swedish LKAB is another important producer that is switching wholly to pellets. It produced 19.9 Mt in 2008. Pellet production in the CIS states decreased by 6.3 % in 2008 to 63.4 Mt. Chile, Venezuela and Peru all experienced falls in their pellet production. Brazil is still the undisputed export leader with exports of 47.6 Mt in 2008, down 10 % from 2007. Its share of total pellets exports decreased slightly in 2008 and is now 35 %. Canada, the second biggest exporter with exports of 20.6 Mt in 2008, is still far behind Brazil. Pellets production, which had been fluctuating between 240 Mt and 230 Mt during the years directly prior to 2001, has been expanding since. But in the end of 2008 came a slowdown when steel production dropped. The pellet plants were first to close when capacity was shut down late last year. In October of 2008 Cliffs Natural Resources stated that it would idle three pellet plants. LKAB put one of its pellet plants on hold for four months beginning 1 December. Brazilian producers also reduced pellets production; with Samarco closing two of its three plants and Vale stopping production in four plants by December 2008. In March 2009, Iron Ore Company of Canada gave up its plans to restart the Sept-Îles pellets plant. This being said, many pellets plants are nevertheless being planned for future iron ore mining projects. When the quality of the iron ore declines, pellets can be the solution to how to make a profit from a potential project. Total pellets capacity is stable at around 350 - 360 Mt. But according to the TEX report, as much as 40 Mt of new capacity was being planned for 2008 and taking into account all the pellets plants being considered, capacity could increase by some 100 Mt during the years to come. The main reasons for using pellets are:

• When steel demand increases steel producers try to increase blast furnace capacity by using raw materials with higher iron content.

• Increasing DRI production, favoured by high scrap prices, and which increasingly tends to be based on pellets.

• Tougher environmental demands on sinter plants, which make pellets use more competitive.

The high investment costs of new pellets capacity is one of the key arguments against them. At present, the main problem facing pellets producers is of course the financial crisis, which does not favour an increase of blast furnace capacity because of lack of demand for steel products. The fact that most iron ore pellets are consumed in developed countries, which have been hit worse by the crisis, means tough years are coming for producers of pellets. New pellet plants under consideration include capacity additions of 33.6 Mt from CVRD, Samarco, MBR, MMX and Mhag Servicos e Mineracão SA in Brazil. In Mauritania, Sphere Investment and SNIM are at the feasibility stage with their joint 7 Mt plant. Some of the other projects are Minnesota Steel's 4.1 Mt plant in the Mesabi Range, New Millennium Capital in Canada (15 Mt), Sohar Industrial Port Company in Oman (7 Mt), Grange Resources in

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Malaysia (7 Mt), Krakatau Steel in Indonesia (1 Mt) and Ferrexpo Poltava Mining in Ukraine (8Mt). There are also plans to increase pellets capacity in India and Iran and London Mining is pushing ahead with its 5 Mt pellets project in Saudi Arabia.

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SEABORNE IRON ORE TRADE Seaborne iron ore trade is estimated to have increased by 7.4 % in 2008 to 845 Mt. The first three quarters were characterized by very strong growth, which turned into a precipitous decline in the final three months of the year, as steel producers slashed production and raw material purchases. During 2009, the impact of the world wide recession will maintain seaborne trade at a level more or less corresponding to that of 2007, that is, around 780 Mt. As will be seen later, we expect iron ore production to fall by more than this figure, since production cuts in mines that do not export their products overseas are likely to be more severe than in the large export mines. Figure 5 shows the development of seaborne trade over the past several years.

Figure 5. Seaborne trade in iron ore, 2000-2009, Mt, (projected 2009)

Source: Clarkson, Dry Bulk Trade Outlook, May 2009 Total dry bulk trade grew by an average of more than 6 per cent per from 2003 to 2008. Freight demand increased at an even faster rate, since reorientation of trade, for instance, the growing importance of Brazilian iron ore exports to China, resulted in longer journeys and therefore a larger quantity of total transport work measured in tonne miles. Accordingly, since the dry bulk fleet also grew at just over 6 per cent per year during the same period, the reserve capacity was gradually eliminated. Moreover, the increase in trade was not evenly distributed across the world, and some ports, for instance, Australian coal export ports, Brazilian ports handling exports of iron ore and import ports along the Chinese coast, experienced a much faster growth in activity than others. The result was congestion of ports and sometimes long waiting periods for ships to be unloaded and loaded. The port congestion reduced effective freight capacity dramatically and led to sharp increases in freight rates. These developments explain the rapid rise in freight rates shown in figure 6. After having risen steadily in 2006, freight rates increased even faster in 2007. They reached a temporary peak at the end of the year, following which they declined. The reason was that new freight orders disappeared, simply because no ships were available, due to a large number of them being held up in Brazilian ports. Freight rates then resumed their rise through the first five months of 2008 and peaked at a record level in May, following which they declined. The decline, which was initially due to significant numbers of new ships being delivered, was

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slow at first and steepened when freight demand collapsed in the autumn of 2008 as a result of the financial crisis, which led to a freeze in trade finance. In late 2008, freight rates had fallen to a low not experienced since the early 2000s. Freight rates recovered somewhat in the early months of 2009, since the very low rates did not cover operating costs for ships, given that oil prices remained at historically high levels.

Figure 6. Average freight rates for Capesize ships (over 80,000 dwt), 2001- April 2009 (USD/t)

Source: SSY. The international freight market will remain depressed this year and maybe for several years to come. The order book (the number of ships on order and being built) corresponded to 28 % of the dry bulk fleet at the end of 2006. It grew to 63 % at the end of 2007, and to 73 % at the end of 2008, as shipping companies, anxious to keep their market shares in what they saw as an endlessly expanding market, continued placing new orders. With freight demand falling, orders are now being cancelled. However, since payments up front are high in the shipbuilding industry, cancellations carry a heavy cost, and mainly concern ships that were going to be delivered in a few years rather than soon. Moreover, although the number of demolitions has increased, it is less interesting to break up ships in a situation where scrap prices have fallen to historical lows. Accordingly, even under “optimistic” assumptions concerning cancellations, the world dry bulk fleet would grow by 10 % in both 2009 and 2010. While the supply of shipping capacity is rising, demand is expected to fall. The recession has particularly severe effects on sectors such as construction, which is strongly dependent on the materials that make up most of the world’s bulk trade, such as steel and steel making raw materials. Most commentators expect a fall in dry bulk trade by 2 to 5 % in 2009 and a small upturn in 2010. This means that the surplus of shipping capacity will continue growing and that it will overhang the freight market for several years to come. This development has

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important implications for the world iron ore market since freight rates has been one of the most decisive influences on the market in recent years – an influence that now appears likely to decline. In early June 2009, freight rates increased unexpectedly. This increase was the result of several factors:

• Severe congestion in Chinese ports, particularly those where iron ore is unloaded, due to a surge in imports

• A shift in Brazilian iron ore exports from Europe to China, resulting in longer journeys

• Lower than expected deliveries of new ships in the first months of the year (only 13 % of the Capesize ships scheduled for delivery in 2009 were actually delivered in the first four months of the year)

• A switch on the part of many freighters to spot chartering It is expected that freight rates will return to lower levels as the weight of new deliveries starts impacting on the shipping market.

IRON ORE PRICES At the time of writing, the 2009 benchmark iron ore price negotiations had not yet been completed despite a first deal being struck by Rio Tinto and a second by Vale two weeks later. This year's round of negotiations have been tougher than in many years. It is likely that a final agreement with the most important group of buyers, the Chinese steelworks, will only be reached by the end of June. The Chinese steel mills are led by Baosteel and backed by CISA, which represents more than 100 steelworks. Voices are still heard demanding a sharp decrease in prices to offset the lower profits for the steel companies. Some buyers demand that iron ore prices to be cut at least to 2007 levels. Initially some expected that price reductions would be as large as 50-60 per cent, but when Chinese spot prices later increased, expectations were moderated. Rio Tinto announced on 26 May that it had reached the first agreement in the 2009 benchmark negotiations with Nippon Steel Corporation, the largest steelmaker in Japan. For the first time in many years it was not Vale that set the first benchmark and it was not made with a Chinese steel company. The outcome of these negotiations was a decrease in price for Pilbara and Yandicoogina fines with 33 % to 97 USc/dmtu and by 44 % to 112 USc/dmtu for Pilbara lump. A few days later Rio Tinto announced that the same terms had been agreed with Korean Posco and the steelmakers CSC and Dragon in Taiwan Province of China. It is significant that the Japanese and the Koreans are first to conclude agreements this year as the steel companies of both countries have been the most vocal supporters of the benchmark price model. Steel companies have been reported to say that they do not want to come into a situation where they are at the mercy of speculators. They maintain that the long term investments necessary for both iron ore miners and steel companies demand either a long term price setting mechanism or a larger share of captive production. The Japanese and the Korean steel mills also depend less on low iron ore costs as they produce higher quality steel than their Chinese competitors.

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The second agreement in 2009 was concluded by Vale on 10 June, also with the Japanese Nippon Steel and Korean Posco. Other Japanese steelmakers such as Sumitomo Metal Industries, Kobe Steel and Nisshin Steel followed suit immediately. Southeastern fines prices declined by 28.2 % to 85.43 USc/dmtu and to 89.87 USc/dmtu for Carajas fines. Lump prices went down by 44.47 % to 99.42 USc/dmtu. With this slightly smaller price reduction for Brazilian deliveries, the freight premium achieved by Australian producers in 2008 differential is almost gone. Vale also concluded the first pellet deal at 110.43 USc/dmtu, a decline by 48.3 %. Finally, on 12 June BHP Billiton agreed on prices with the Japanese steel company JFE Steel. The Mt Newman lump price was set at at US¢112.00/dmtu and Mt Newman fines price at US¢97.00/dmtu, down 44.47% and 32.95% from the previous year, respectively. Thus, all three large producers have concluded agreements with some of their customers, in the case of the two Australian producers with exactly the same price reductions. This was the first year with a decline following six consecutive years of increasing prices and cumulative price increases by more than 400 %, for instance for Hamersley lump to Asia. Even after the 2009 reduction, prices are at historically high levels and slightly higher than in 2007 for both lump and fines. From 2002 fines prices from Australia to Japan have increased by 343 % and lump by 310 %. Vale’s earlier dominance as price setter has been broken. The Brazilian company announced at an early stage that it would not be the first to conclude a deal this year. Vale is trying to avoid last year's failure when it achieved a lower price increase than the Australians who settled later. The relative absence of the Chinese steel mills is also striking. They gradually managed to act in a more coordinated fashion in negotiations until they were part of the first settlement with Vale in 2007. In 2008, however, Vale made the first deal with a European buyer and the Chinese were not playing the key role. As in 2008, all market participants have not agreed to the new prices. Chinese steel mills have not yet made any agreements. Normally, most contracts are settled within a few weeks after the initial agreement. In 2008 the Australian producers did not accept the benchmark price set by Vale. Instead, they demanded a "freight premium" because of the lower cost of shipping ore from Australia to Asia. The CISA stated that “Australian miners are asking for a freight rate premium, and Chinese mills are not willing to accept this”. From Rio Tinto came the comment that “All that we’re seeking is a fair return for the savings on freight, the natural premium of geographical proximity.” In the end the Chinese had to give in and on 24 June Rio Tinto announced that it had come to an agreement with Baosteel. The new iron ore price was settled with a 79.88 % increase for Hamersley fines and 96.50 % increase for Hamersley lump ore. Shortly afterwards, the Japanese steel companies accepted the price increases. And on 4 July BHP Billiton announced that it had come to an agreement with the Chinese on the same conditions. By 7 July the Japanese steel companies also accepted BHP Billiton’s prices. On 7 November five Japanese steel mills agreed on iron ore prices for the fiscal year of 2008 with Indian entity MMTC in representation of Indian iron ore suppliers and with that the 2008 iron ore negotiations were concluded. On 9 September 2008 Vale announced that it had approached its Asian customers to call for an increase of prices of between 11.0 – 11.5 %. Vale claimed that the intention was to harmonise the prices paid by European and Asian customers. At present the steel mills in

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Europe pay more for their iron ore than their Asian competitors. Chinese steel mills however refused and when spot prices started to decline Vale dropped its claim for higher prices. As a result of the onset of recession, spot prices in China for imported ore fell from a monthly average of 1570 RMB/t in July for 63.5 % Indian fine ore at Tianjin port to 590 RMB/t in October. Prices increased slightly during the next couple of months but never went higher than 655 RMB/t and in April 2009 they were down to 540 RMB/t (see figure 7).

When the iron ore spot price plunged in the wake of the global financial crisis there was no doubt that benchmark prices would also be cut. The benchmark pricing system is under fierce discussion and its future is uncertain, to say the least. It seems likely that it will be modified in various ways and there are many indications that this is happening:

• The Australians succeeded in getting a freight premium in the 2008 negotiations. • Vale asked for a price adjustment in September 2008 to level out the European and the

Asian iron ore prices. • Vale refused the price setting role in 2009 although it has been the strongest proponent

of negotiated prices. • The drawn out negotiations in themselves are putting pressure on the system. In 2009

the sellers were hoping that the market situation in the steel sector would improve before negations were completed.

• Some steel companies have cancelled their long term contracts and started to buy in the spot market - at least as long as these prices are lower than the contract prices.

• The volumes traded on the spot market have steadily grown and in 2008 all the three large producers sold increasing volumes on the spot market. But the spot market still does not account for more than 20-25 per cent of the total and in the present downturn the share might decline.

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• Beginning in the first half of 2008 several new pricing mechanisms and price risk management instruments have been introduced that makes spot trading easier and less risky: the Metal Bulletin and Platts iron ore indexes; iron ore swaps offered by several banks, including Deutsche Bank and Credit Suisse; the Singapore Exchange has cleared OTC iron ore swap contracts.

A new price setting mechanism will however not be introduced overnight. Instead, it will take several years to find a new model and probably there will be several models in use in parallel. It is not likely either that the benchmark negotiations will disappear completely. In 2009 and 2010 hybrid models will be used combining elements from both a benchmark model and a spot model. When price negotiations for 2009 started, the Chinese demanded that the price should be effective from the first of January and that prices should be settled twice or four times a year instead of only once. In order to have a system similar to the model used for copper trading based on the LME prices a lot more liquidity and transparency than today will also be necessary. Another alternative that is not yet ready for full scale application is to use a widely traded steel quality as the basis. Steel trading on the LME, which was recently introduced, has however not developed as quickly as hoped for. On the producing side, BHP Billiton has been proposing a new system since 2006. It argues that an index based system or spot prices would allow consumers to hedge the risk of market fluctuations and lock in prices. This is not possible with the present system. In earlier years Rio Tinto was leaning towards the same opinion as BHP Billiton but this year's initial benchmark prices indicate that it may have modified its position slightly towards a dual system. Vale has been the fiercest proponent of the bench mark system but with its recent refusal to take the lead it seems as if it is also changing its opinion. When considering the future of iron ore pricing it is however also important to understand that most iron ore is sold on long term contracts and that buying iron ore is not like buying other metals. One of the most important considerations for steel mills is the consistency of quality of the iron ore. The operator of a blast furnace wants to be absolutely able to trust that the iron ore to be delivered will be of the same quality as that in the last batch. This means that the system favours long term contracts from steady suppliers. But the price needs to reflect the changing market conditions. When the market declined rapidly in late 2008 and benchmark prices stayed the same most steel producers were locked in long term contracts that exposed them to losses once the bottom fell out of the market for steel products. The final outcome of negotiations for prices to China is still uncertain. The process has dragged on for longer than in any of the last ten years. The early settlement by the Japanese and the Koreans with Rio Tinto makes it less likely that the Chinese will manage to get a larger reduction than the Japanese. More likely is either no agreement at all – which would not be totally controversial as a large portion of Chinese imports is already traded on a spot basis - or to settle at the rates already negotiated with the producers by other Asian steel makers. Clauses providing for regular price adjustments could also be introduced to accommodate the interests of BHP Billiton and Chinese steel mills. Whatever the outcome, the future of the benchmark negotiating system looks bleak. The power of the major iron ore producers is unchanged and the Chinese will continue to opt for more captive iron ore supply.

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II. STEEL IN 2008

CRUDE STEEL PRODUCTION World crude steel production decreased from 1345.4 Mt in 2007 to 1324.7 Mt in 2008, a change of -1.5 % (see figure 8 and annex table A13).

Source: World Steel Association Production in China increased by 1.9 per cent. While production was still rising, the rate of growth was much lower than the 16 % change achieved in 2007. China now accounts for more than a third of world production (38 %). All regions except Asia experienced falls in production. In Europe, production fell by 6.4 per cent and Africa experienced a decrease of 8.8 per cent. In the Americas production declined with 4.9 % and in Oceania, production was reduced by 4.1 %. Asia increased its production with 1.5 % if China is included and 0.8 % excluding China. Among the larger producers, the United States, Russia and Germany experienced decreasing production by between 5.4 and 7.0 %, while Japan had a slightly smaller decrease of 1.2 %. China, India and the Republic of Korea all experienced increases of between 1.9 and 4.1 per cent. In the first three months of 2009, crude steel production has levelled out after the fall in 2008 from the record month of May 2008, when 121 Mt was produced, to the low of December 2008 with 82 Mt. Production now seems to have stopped falling and there was even a slight rise in world production to 92 Mt in March. World output (for World Steel Association member countries) for the period was 23 per cent lower than in the same period in 2008. There are exceptions to the falling trend. In China, production of crude steel actually increased with 1.4 % in the first quarter of 2009 compared to the same period last year.

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PIG IRON PRODUCTION

World pig iron production in 2008 was 926.4 Mt. This represented a decrease by 2.1 % compared to 2007 (946.3 Mt, see annex table A12). China, which accounted for about 51 % of world production of pig iron in 2008, compared to about 50 % in 2007, experienced a decrease, from 469 Mt to 468 Mt or by 0.3 %. Production in the second largest producing country, Japan, also decreased slightly by 0.7 % to 86 Mt. Production in Russia decreased by 5.5 % to 48 Mt, and in Ukraine it decreased by 13 % to 31 Mt. In the United States, where production fell precipitously in 2005 and where production subsequently was fairly stable, there was a further decrease of 6.7 % to 34 Mt in 2008. In the European Union (15), production decreased by 5.3 % from 95 Mt to 90 Mt. Brazil, which experienced an increase in production in 2007, reduced its production in 2008 by 1.7 % to 35 Mt. India’s production rose by a modest 0.3 % to 29 Mt. In the Republic of Korea, production rose by 7.2 %, to 31 Mt, and in Taiwan Province of China it decreased by 7.6 %, to 9.7 Mt.

DIRECT REDUCED IRON (DRI) PRODUCTION In 2008, world production of DRI amounted to 68.5 Mt, an increase of 1.8 % compared to 2007 (see figure 9 and annex table A11). Global DRI capacity increased by 1.6 Mt or some 2.5 %. Growth was mostly due to ramping up of production at plants already started in 2007. This was the case in for example Saudi Arabia, Russia, Qatar, India, Iran and Malaysia. 2008 turned out to be a turbulent year: it started off with input shortages, for example of iron oxide pellets in Venezuela, but by the end of 2008 the slowdown resulted in approximately one third of DRI capacity being idle. One obvious reaction to this was a halt in most construction of additional plant capacity.

Source: Midrex.

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India remains the leading producer and its production is now 21.2 Mt. The increase for 2008 was 11 %, a slower rate than the 29 % achieved the year before. Iran, the second largest producer, experienced an increase in production of 0.3 %. DRI capacity increased, however, by 11 %. Production in Venezuela, which used to be the second largest producer, fell again. Now at 6.9 Mt, the country is number three. The decrease in production was 11 %, marking the third consecutive year of falling production. The MIDREX process continues to be the most important for DRI production, accounting for 58 % of the world total, a very slight decrease since last year when it had 59 %. When the crisis hit there were plans, as well as already started projects, for adding to total world capacity. Some of the plans will most probably be pushed to the future or put on hold, but DRI plants are under construction in several countries, including Abu Dhabi, Oman, Pakistan, Egypt, India and Iran. In 2008 total world exports of DRI was 14.0 Mt, down by 18 % compared to 2007.

STEEL USE, TRADE AND PRICES The steel industry is facing its worst demand downturn since the oil crisis of 1974-1975. The main reason for this is that steel is a key input in the construction, mechanical engineering and transport vehicle industries, sectors that are among the hardest hit in the current global economic recession. What began as a gradual slowdown in global steel use growth in the second half of 2007 in most developed countries became a sharp worldwide contraction in the autumn of 2008. In the fourth quarter, world apparent steel use was about 20 % lower than in the final quarter of 2007. As a result of the steep downturn in the final quarter, world use of finished steel products decreased in 2008 by 1.4 % to 1,197 Mt (see figure 10). Steel use fell in the developed world, which entered recession earlier, while it continued rising in most developing countries. In China, steel use increased by 2.9 %, and increases were also recorded in other Asian countries and in Latin America. The recession has also led to a very large slowdown in trade. Following a strong performance in the first nine months of 2009, the volume of world trade in steel (average of exports and imports) declined by 20 % in the fourth quarter from a year earlier. The reaction of steel trade in the current cycle has been much stronger than during the past episodes of weak demand. This is the result of exporters’ reduced access to credit to finance shipments and the intensity and scope of the current global demand contraction. For example, the market downturn 1990-1992 was associated with a rapid expansion in trade volumes. During the Asian crisis of 1998-1999, steel trade declined, but at a much slower pace than today. Although reductions in global supply have prevented steeper steel price declines, the industry is nevertheless experiencing one of the most substantial price falls ever. After reaching a historical high in July 2008, the average global price of steel has declined each month. By the end of 2008, the price was back at pre-boom levels in Europe and North America, more or less equal to prices in early 2006 8although still more than twice as high as in 2000). Prices in China have held up much better and appeared to halt their decline in late 2008, illustrating that steel prices in regional markets can diverge significantly.

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Figure 10. Apparent world steel use, Mt

Source: World Steel Association

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III. COUNTRY INFORMATION

EUROPE

AUSTRIA

Production of iron ore in Austria was 2.0 Mt in 2008, a decrease of 5.6 % compared to last year. Imports into Austria also declined, from 9.0 Mt to 8.0 Mt, a change of -11 %. The Erzberg open pit mine is the only producer. The entire production is delivered to the Donawitz and Linz steelworks in the Voest-Alpine group. Production was originally planned to cease in the early 2000s but operations have continuously been upgraded and the economics of the operation have improved as a result of high iron ore prices.

NORWAY Norway has only one iron ore producer, Rana Gruber AS. Iron ore is extracted from the Kvannevann underground mine situated in the ∅rtfjell mining area close to the Storforshei village. The mine was inaugurated in 1999. In 2008 the company’s production was an estimated 0.6 Mt, a slight decrease from last year. The production consists of concentrates. High value pigments account for an economically important part of Rana’s production. All of the concentrate produced is exported to Germany and the Netherlands. The iron ore at the Kvannevann underground mine contains an average of 33% iron and around 1.6 million tonnes of ore is mined annually by underground open stope mining methods. In June 2007 the board of directors decided to partly change their plans for the mine. The new investment plan consists of among other things a new sub-level to be opened by 2009. This will extend the lifetime of the mine considerably. At this new sub-level operations will run until 2025. To meet the demand for iron ore, Rana Gruber AS has decided to expand its mine and add an open pit operation to the underground mine. The open pit operation will take ore from mainly the Eriksbruddet ore body close to the original mine. In early 2006 the Sydvaranger mine on the border to Russia, which had been in operation between 1910 and 1997, was bought by a local property developer. The mine was later taken over by the Norwegian shipping company Tschudi. In December 2007 Northern Iron Limited, the owner of Sydvaranger, was listed on the Australian stock exchange in the largest mining IPO of that year. Tschudi kept control and sold out only 49 % of the project and raised over 140 million Australian Dollars. Production is projected to start in 2009 at 2.9 Mt per year of magnetite concentrate.

SWEDEN

In 2008 the production of iron ore in Sweden decreased with 3.5 % to 23.8 Mt, of which 19.9 Mt was pellets and the rest was fines. The two largely automated underground mines (Kiruna and Malmberget) run by LKAB, the 100 % state controlled sole Swedish producer of iron ore, together produced some 43 Mt run of mine ore. During 2008 production of fines from the Kiruna mine stopped. Fines will in the future only be available from Malmberget and Kiruna will be a 100 % pellets mine. Exports also declined during 2008 to 17.8 Mt, down 8.2 % from last year’s record of 19.4 Mt. Exports now account for 75 % of total production, slightly down

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from 79 % in 2007. Pellets production accounted for 84 % of the total volume, an increase from 76 % in 2007. Pellets exports increased by 3.2 % to 13 Mt. Most deliveries (65 %) are bound for European markets. Other important markets are North Africa and the Middle East, including Egypt, Saudi Arabia, Turkey, Qatar, Libya and the United Arab Emirates. During the last couple of years LKAB has made several major investments with a view to increasing the company’s production capacity. These strategic investments will take the company from around 23 Mt, to 30 Mt of iron ore products per year. During May of 2008 the new pellets plant at the Kiruna mine was finalised and taken into production. This was an important step towards the company’s plan to become a 100 % pellet producer. During 2008 the decision was taken to establish new sub-levels in the two mines. This represents investments of totally 17 billion SEK (a little more than 2 billion US dollars), including some already spent on infrastructure in the mines, and will increase the company’s production capacity and the life of the mines. The new sub-level at the Malmberget mine is planned to be taken into use in 2010 and that in the Kiruna mine in 2012. Since 2005 LKAB has undertaken major upgrading work on its logistics between mines and harbours. This includes funds being allocated to the train fleet. A uniform fleet of locomotives and ore cars for a minimum 30-tonne axle load will be introduced. In January 2006, construction of a whole new storage and discharging structure with underground silos began in the harbor of Narvik. This work is planned to be finished by the fourth quarter of 2009. At least four new iron ore projects are being developed in Sweden: two green field projects in the northern part of the country by foreign controlled junior companies (Northland Resources with several advanced projects and Beowulf with one early stage project) and a plan funded by local capital to revive the Dannemora mine 100 km north of Stockholm, which had been in operation since medieval times but was closed in 1992. In central Sweden Grängesberg Iron AB is planning to reopen the old Grängesberg iron ore mine that closed down 1990. A pre-feasibility study is scheduled to be completed by 2010.

OTHER EUROPE

In the rest of Western Europe, large scale iron ore production for the steel industry ceased in 1997. Mining has continued on a small scale but the ore has been used mainly as a coloured ballast material in the concrete industry, as heavy media in mineral processing and as raw material in the production of pigments with magnetic properties. Production takes place in Germany with an output of 0.5 Mt in 2008 at the Wohlverfahrt–Nammen mine and in Spain. Imports of iron ore into Europe (excluding the CIS countries) decreased by 5 %, from 173 Mt in 2007 to 164 Mt in 2008. Countries with rising imports include Belgium, Bosnia and Herzegovina, Czech Republic and Serbia. All other countries in Europe experienced falling iron ore imports in 2008 compared to 2007. The five most important importing countries in Europe 2008 are Germany with 44.3 Mt, France with 18.3 Mt, Italy with 16.3 Mt, the United Kingdom with 15.3 Mt and Belgium with 12.3 Mt. Eastern Europe still has some small scale production of iron ore for the steel industry. The most important producing country is Bosnia and Herzegovina, where iron ore output has risen considerably the last two years. Production in 2008 reached 1.2 Mt compared to 1.3 Mt in 2007 but as much as 3.4 Mt in 2006. Bosnia and Herzegovina exported around 0.7 Mt of iron ore in 2008.

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Mines in the former Yugoslavia include:

• The operations in Prijedor area, mainly Ljubija mine, operated by the former Rudarsko Metalurski Kombinat Zenica, now ArcelorMittal, in Bosnia and Herzegovina. Since ArcelorMittal took over in 2004 the mine has been rehabilitated and annual production is now back at the former level of 1.5 Mt after an expansion programme was successfully implemented. A new pit, Buvac, is also planned to open in the same area in 2009.

• The lateritic nickel-iron ores in Kosovo, Magura, Glagovac, Lipjan, Trstenik and Cikatovo, all open pit mines and all closed since the mid 1990s.

• The Skopje Rudnici i Zeljezarnica in the Former Yugoslav Republic of Macedonia used to operate some small iron ore mines (Tajmiste, Demir Hisar and Damja) with a total capacity of not more than 1 Mt. All closed down in the mid 1990s but have now been re-opened and are reportedly gradually reaching their former production capacity.

Other producing countries include Slovakia with a preliminary 0.2 Mt in production 2008. Slovakia, has experienced a steady decline in iron ore production during the last years and in October of 2008 the mine closed down. A small portion of the production, 0.1 Mt, was exported to Czech Republic and Serbia. Iron ore was produced in the underground mine at Nizna Slana, Slovakia’s only iron ore mine. In 2008 it produced 0.2 Mt (preliminary figures) of pellets. Production has been more or less stable for the last four years after a drop in production of about 45 % between 2001 and 2002. The mine is fully owned by the private company Oz Siderit. In Bulgaria iron ore used to be mined at the open pit Kremikovtsi mine. In 2005, however, the mine was closed down. The two remaining Romanian small scale mines, Remin and Deva, continued to produce a few hundred thousand tonnes until 2007 when they were closed.

CIS REPUBLICS The CIS (ex-USSR) republics, Russia, Ukraine and Kazakhstan, all reduced their iron ore production, from a total of 202.1 Mt in 2007 to 190.4 in 2008, a decrease of 5.8 %. Exports, which totalled 59.6 Mt in 2008, decreased by 4.3 % compared to the 62.2 Mt exported in 2007. In 2008 imports into the CIS republics increased to 15.1 Mt. By world standards, the iron ore sector in the CIS republics was fragmented earlier. Beginning in 2004, however, several steps towards consolidation were taken and from 2007 this process could be said to be complete. The years of high prices and a belief in the strong fundamentals for iron ore mining have prompted many new ideas for projects in parts of the CIS that were not earlier considered as potential iron ore districts: Kyrgyzstan, Uzbekistan, arctic Ural, the Siberian Chita and Tomsk regions. Companies, both domestic and foreign, which earlier were not interested in this metal have entered the industry: the diamond producer Alrosa, copper producer Urals Mining and Metallurgical Company (UMMC), Uzbek gold mining giant Navoi, British gold miner Peter

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Hambro, German steel and technology group Salzgitter and several private Chinese mining groups such as the Luneng Group. How many of these that will survive the current financial climate is hard to say but the developments have shown that the CIS countries have potential.

KAZAKHSTAN Iron ore output in Kazakhstan fell in 2008. Production reached an estimated 18.8 Mt, down 4.6 % compared to 2007. Total exports from Kazakhstan were estimated at 15.2 Mt, a decrease of 5.1 %. Kazakhstan’s exports have traditionally been shipped by railway to Russia. Since 2003, following the announcement that Jiugang Iron & Steel would increase its imports of Kazakh iron ore up to 3 Mt, China has become more important as a market for Kazakh iron ore. Kazakhstan is equidistant to China and Europe, and this location could be turned into a major advantage in the future. Pellets production is important in Kazakhstan and accounted for some 53 % of total exports and 43 % of the total production in 2008. The Sokolovsko-Sarbay Mining and Processing Industrial Association (SSGPO) dominates Kazakh iron ore production. SSGPO is one of the members of the Eurasian Natural Resources Corp, which brings together some of the country’s biggest producers of ferroalloys, iron ore, alumina and aluminium and energy. SSGPO is reportedly controlled by Belarussian Alexander Mashkevich together with local interests. The nature of the Association and the interaction between its members are difficult to assess for outsiders. The ambitions to create a larger iron ore unit by teaming up with other Russian and Ukrainian produces have been widely publicised but it seems that this process has ground to a halt. In 2008 the company produced 15.5 Mt. at the three open pit mines Korzhinkolskoye, Sarbaisky and Sokolovsky, down from 16.8 Mt in 2007. Early 2009 the company was reluctant to forecast iron ore sales as SSGPO is working at roughly 60 % of capacity. The second iron ore producer in the country is Arcelor Mittal which has four iron ore mines in central Kazakhstan: Lisakovsky Mining and Beneficiation Plant (GOK), Atasuysky GOK, Atansor mine and Kentobe mine together produced 3.3 Mt in 2008, raising production by 14 % from 2.9 Mt in 2007. All of these operations supply the Arcelor Mittal group’s Temirtau Steelworks (previously Ispat Karmet) in the Karaganda region of Kazakhstan.

RUSSIA Iron ore production in Russia fell by 4.9 % in 2008 to 100 Mt, down from 105 Mt in 2007. Exports were 22.5 Mt, down 12 % from 2007 when exports was 25.5 Mt. The five most important export markets for Russian iron ore are: China 5.8 Mt, Poland 3.9 Mt, Ukraine 2.4 Mt, Slovakia 2.2 Mt and Czech Republic 2.1 Mt. China has been by far the fastest growing export market the last couple of years and in 2007 China became the largest single importer of Russian iron ore. In 2008 it was the only country of the top five importers from Russia with a growing import, however modest, at 1.0 % compared to 2007. Russia imported 12.1 Mt of iron ore in 2008, down 11 % from 2007. Almost all of that iron ore came from Kazakhstan. Russia has three major iron ore mining districts, the Kursk Magnetic Anomaly area (KMA) on the border with the Ukraine, the north western Kola Peninsula and Karelian area and in the Ural Mountains. Of these three areas KMA is the most important. Many of the mines are huge open pit operations, some handling over 100 Mt of rock and ore annually, but the ore grades are low and in an international comparison of output most mines and mining companies are

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relatively small. The six most important mines are in order of production: Lebedinsky GOK, Michailovsky GOK, Stoilensky GOK, Kachkanarsky GOK, Karelsky Okatysh and Kovdorsky GOK. These six mines together accounted for more than 75 % of total Russian production in 2008. Several underground mines in the Ural region produce only 500-600 kt annually, with production being delivered to nearby steelworks in West Siberia. Russian steel works control most of the domestic iron ore production. In recent years they have also begun to look for alternative iron ore sources outside their traditional home turf. They have interests in India, Pakistan, and Iran, and also in South America, South Africa and West Africa.

UKRAINE Ukrainian iron ore production decreased in 2008 by 7.4 % to 71.7 Mt. Exports on the other hand increased by 5.4 % from 20.7 Mt in 2007 to 21.9 Mt in 2008. The most important exporting area for Ukrainian iron ore is Eastern Europe, which receives around 65 % of Ukraine’s exports. The three most important destinations are, in order of importance: the Czech Republic, Poland and Slovakia. More than 52 % of Ukraine’s exports end up in these three countries. Ukraine’s imports decreased from 3.6 Mt in 2007 to a preliminary 3.0 Mt in 2008. The pellet proportion of production has stayed almost the same, at between 23 % and 29 %, throughout the last eight years. The pellet proportion of exports rose between 2001 and 2005 but it has decreased since 2006 and is currently at 40 %. Ukraine has nine major iron ore operations: Inguletsky GOK, the largest, produced 12.6 Mt in 2008, Severny GOK also produced 12.6 Mt, Novokrivorozhsky GOK with 9.4 Mt, Yuzhny GOK with an estimated 6.5 Mt, Poltavsky GOK 10.5 Mt, Krivoy Rog an estimated 5.3 Mt, Tsentralny GOK 5.7, Zaporozhye mining complex an estimated 3.3 and Sukhaya Balka iron ore mine, the smallest, produced 2.7 Mt in 2008. Russian based Evraz completed the acquisition of Sukhaya Balka in 2007 as part of its taking over the entire Dnepropetrovsk Iron & Steel Works. Most of the Ukrainian steel industry was privatised in 2004. Some of the deals were directly challenged and had to be put out for renewed tender. In 2005 Mittal Steel made a successful bid in the repeat sale of Kryvorizhstal, which was first taken over in the 2004 initial privatisation by System Capital Management through its subsidiary Investment Metallurgical Union. In the 2005 deal Mittal acquired 93 per cent of the integrated steel plant and two iron ore mines, Novokrivorozhsky GOK and Artem, for a total consideration of 4,790 MUSD. Kryvorizhstal was renamed ArcelorMittal Kryviy Rih. Under the agreement under which it was acquired, ArcelorMittal Kryviy Rih is committed to invest 500 MUSD through 2010. By the end of 2008 some 495 MUSD of this sum had been invested.

AFRICA

MAURITANIA In Mauritania, Societé National Industrielle et Minière (SNIM) is the sole producer of iron ore. The 78.4 % state owned company had a production of 11.2 Mt in 2008, a decrease of 0.7 % compared to 2007. Mauritania is now back to the levels reached in the 1990s when

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production was 11 Mt and more. All of Mauritania’s production is for export and in 2008, 11.0 Mt were exported, an increase of 7.2 % compared to 2007. The main market for Mauritania’s iron ore exports is Europe. About 77 % of Mauritania’s iron ore ended up there in 2008. In 2007 exports to China also took off and in 2008 some 2.5 Mt was exported to the Chinese market. The five most important destinations, accounting for 88 % of exports, are, in order of importance, China, France, Germany, Italy and Belgium. SNIM has three operating mines: M’Haoudat, Guelb El Rhein and Idjill Kedia. A couple of iron ore projects are under development in Mauritania. The Australian company Sphere Investments is developing the Guelb el Aouj project in a joint venture with SNIM. The deposit has resources of over 926 Mt and reserves of some 430 Mt of magnetite iron ore. The mine has an estimated life span of at least 30 years. Plans have been expanded to include also a pellets works of 7 Mt/year and development of two other deposits nearby. In 2007 Qatar Steel agreed to take a 49.9 per cent interest in the project. After being unable to execute formal agreements, however, SNIM and Sphere cancelled the deal and are currently 50 % project partners. According to Sphere, a formal process has started to introduce a new partner capable of assisting with development of the project.

SOUTH AFRICA South Africa’s production increased by 18 per cent, from 41.6 Mt in 2007 to 49.0 Mt in 2008. The country accounts for more than 75 per cent of Africa’s total production and exports. The sharp increase in production compared to 2007 comes after a period in which the South African growth rate was below those of the other important iron ore producing countries. Between 2003 and 2007, the growth was only 9.2 %. South African exports of iron ore increased by 8.0 per cent to 32.8 Mt in 2008, up from 30.3 Mt in 2007. The most important countries for South African Export are China, Japan, Germany and the United Kingdom. Kumba Iron Ore, previously Kumba Resources, is the largest producer of iron ore in Africa. It was spun off from previously state owned Iscor (now part of Arcelor Mittal Steel), the largest South African steel producer, in November 2001. There are still close links between the two and Arcelor Mittal/Iscor has access to Kumba iron ore at a preferential price of production costs plus 3 %. The company owns two iron ore mines, Sishen and Tabazimbi. Together the two mines account for 75 % of the country’s total production. Sishen with its 34.0 Mt production in 2008 is by far the largest iron ore mine in Africa. Tabazimbi’s production in 2008 was 2.7 Mt. Assmang is the second largest iron ore mining company in South Africa and its Beeshoek iron ore mine produced 4.5 Mt in 2008. The mine is however reaching the end of its economic life and will not be able to sustain its current output. For this reason the Khumani iron ore mine was opened in 2008. At the Khumani iron ore mine production reached 1.85 Mt in 2008. At the present production rate the mine life is in excess of 40 years. There are already plans to increase production. Assmang is partly controlled by Patrice Motsepe’s African Rainbow Minerals (ARM). Highveld Steel & Vanadium, which operates the captive Mapochs vanadium/iron ore mine, produced an estimated 2.0 Mt in the year 2008. In 2001 Iscor, the integrated steel company, which until 1989 was owned by the government of South Africa, split into two companies, Iscor and Kumba Resources. All mines and mining assets came to belong to Kumba Resources. By December 2003 Anglo American got full

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control over Kumba Resources with over 66 per cent of the equity. This was contrary to an earlier agreement with South African government to keep the Anglo share of Kumba below 49 per cent. With the empowerment deal announced in October 2005 and finally executed in late 2006, Anglo was able to honour its earlier commitments. Kumba was divided into two parts: Kumba Iron Ore containing the iron ore mines and projects, and a second company with all other assets, now named Exxaro. Anglo American holds a 63.4 % share in Kumba Iron Ore, which in its turn own 74 per cent of the Sishen Iron Ore Company (SIOC). The balance in SIOC is held by Exxaro (20 %) together with SIOC Community Development Trust (3 %) and SIOC employees (3 %). Anglo American also owns 9.9 per cent in Exxaro. The 36.6 % balance in Kumba iron is owned by government controlled Industrial Development Corporation IDC (13.1 %) and other minority interests (23.5 %). Kumba has an aggressive long term strategy and its project pipeline includes plans to expand iron ore production in the Northern Cape province to 50 Mt/a by 2013. This expansion is however dependent upon market conditions and rail and port expansions. The current 861 km railway line from the mines to the Saldanha Bay harbour north of Cape Town does not have the capacity needed at present. Currently some 27 Mt/a of iron ore can go on the railway. The port at Saldanha Bay is expanding its capacity to 38 Mt/a and the upgrade of the railway to accommodate the expansion plans is scheduled to be complete in 2009/2010. Indian steel company Tata has announced that it intends to start iron ore production of 1-2 Mt/year in cooperation with a so called black empowerment company, Sedibeng. This is the first inward investment into South African iron ore mining.

OTHER AFRICA Production of iron ore in 2008 in Egypt, Algeria, Zimbabwe and Tunisia is estimated at 3.9 Mt. The entire production of these countries is consumed domestically. In Egypt, the state owned Egyptian Iron & Steel Company operates the El-Gedida mine in the northern part of the country. Production in 2008 remained at just about 2 Mt. Algeria has two iron ore mines, Bou Khadra and Ouenza, both operated by Mittal Steel Tébessa, which is in turn owned by ArcelorMittal Annaba, which is part of the Arcelor Mittal group. This company is jointly owned by the state (30 %) and Arcelor Mittal (70 %). Production in 2008 was 1.7 Mt. In Zimbabwe, production has more or less stopped. Iron ore in Zimbabwe was mined by the Buchwa Iron Mining Company Ltd at its Ripple Creek mine. There has been a shortage of iron ore in Zimbabwe but the country has not been able to import any because of lack of foreign currency. The state controlled Zimbabwe Iron & Steel Company Ltd (ZISCO) is the owner of the operation in Zimbabwe. In March 2006 a deal was made between ZISCO and India’s Global Steel Holdings. The latter was given a 20 year management contract for the steel plant which would remain government owned in exchange for some 400 million Australian Dollars in investments, but in the end the deal fell through. The iron and steel industry of Zimbabwe will probably need many more years before it can return to the production figures of the eighties and early nineties. There is a minor state controlled iron ore operation in Tunisia supplying the local steel works. Some 0.2 Mt of iron ore was produced in 2008. Production from the two mines, Djerissa and Tamera, has been more or less constant during the last ten years.

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NORTH AMERICA

CANADA Canadian shipments of iron ore decreased in 2008, down 5.9 % from 34.1 Mt in 2007 to 32.1 Mt 2008. This was the second year in a row of falling production. Exports also fell but by less, from 28.3 Mt in 2007 to 28.2 Mt in 2008. Canadian imports, on the other hand, increased by as much as 28 %, from 7.3 Mt in 2007 to 9.3 Mt in 2008. There are three major iron ore mines in Canada: the Mt Wright mine, the Carol iron ore mines and the Wabush Mines. The Mt Wright mine is operated by Quebec Cartier Mining (QCM) and produced 13.8 Mt of iron ore in 2008. QCM is fully owned since 22 July 2005 by Dofasco, which bought the shares of Caemi and the Québec government fund Investissement Québec (33.3 % each). After the merger between Arcelor and Dofasco the mine has become part of the Arcelor Mittal group. The Carol iron ore mines, owned by the Iron Ore Company of Canada (IOC), increased production by 20 % to 15.8 Mt in 2008. The owners are Rio Tinto, Japanese Mitsubishi Corporation and the Labrador Iron Ore Royalty Income Fund. The third producer is the Wabush Mines, jointly controlled by Stelco, ArcelorMittal and Cleveland-Cliffs, which produced 4.2 Mt in 2008, down from 4.6 Mt in 2007. Negotiations for Arcelor Mittals acquisition of the total ownership of the Wabush mine that started in 2007 came to a halt in April 2008 without any changes to the ownership. There are several projects in the pipeline in the Canadian Arctic. They are truly world class projects in terms of their grades and quality but demand high investments and carry high transport costs. Most of them will probably be put on hold in view of the present lower prices.

UNITED STATES Production in 2008 was preliminarily 53.0 Mt, 1.1 % higher than in 2007. The proportion of pellets in total production was roughly 90 % in 2008. This is a lot lower than last year when almost all the production consisted of pellets. Exports, mainly to Canada, where some 81 % end up, increased by 20 % in 2008 to 11.1 Mt. Imports were almost unchanged at 9.2 Mt, down from 9.4 Mt in 2007 and 11.7 Mt in 2006. Canada and Brazil continued to be the two major exporters to the United States, accounting for 92 % of imports. In 2008, imports from Canada increased by 11 % and imports from Brazil decreased by 19 %. The most important companies are Cliffs Natural Resources Inc (formerly Cleveland Cliffs Inc), US Steel Corp and ArcelorMittal, which owns Ispat Inland Mining Company and 62.3 % of Hibbing Taconite Co. In April 2005 International Steel Group (ISG), containing the remnants of Bethlehem Steel, Republic Steel and LTV, and Ispat Inland merged to form Mittal Steel USA, which owns 100 per cent of Ispat Inland Mining Company. The Minorca mine, fully controlled by Mittal Steel USA, produced at more or less full capacity in 2008 and output reached 2.8 Mt. Mittal is also involved in the Empire iron ore mine through the Empire Iron Ore Partnership together with Cleveland Cliffs Inc. The latter company, the largest of the iron ore producers in the United States, also controls the iron ore mines Northshore (Babbit), United Taconite (Eveleth) and Tilden. Cliffs Natural Resources Inc, International Steel Group Inc and Stelco Inc of Canada are joint owners of the Hibbing iron

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ore mine. Total production of the mines and the percentage owned by Cleveland Cliffs are shown in table 2. Table 2. Iron ore mines in which Cleveland Cliffs holds an interest Total Total Ownership production 2007 production 2008 % Mt Mt Empire 79 4.9 4.6 United Taconite 100 5.3 5.1 Tilden 85 7.2 7.6 Hibbing 23 7.4 8.2 Northshore 100 5.2 5.5 Two mines, Keewatin and Minntac, are wholly owned by US Steel Corp. Together they produced 19.2 Mt in 2008. Approximately three quarters of the production comes from Minntac which makes it the largest iron ore mine in the United States. Compared to 2007, production at the two mines rose by about 1.6 %. The mines in the United States are all located on the Marquette Range in Michigan and the Mesabi Range in northern Minnesota. They are all relatively low grade taconite open pit operations.

LATIN AMERICA

BRAZIL Iron ore production in Brazil increased by 2.8 % in 2008 to an estimated 346 Mt. This is the tenth consecutive year of growth in the Brazilian iron ore industry. Pellets production decreased by 7.7 % from 54.2 Mt in 2007 to 50 Mt in 2008 and now represents 14 % of total production. Exports grew, however, from 269.4 Mt in 2007 to 281.7 in 2008, up by 4.5 %. In 2007 Brazil exported 80 % of its total production. In 2008 this figure increased slightly to 81 %. In 2007 Brazil became the world’s largest producer as well as exporter of iron ore, but in 2008 it was the third largest producer after China and Australia and the second largest exporter after Australia. The two largest export markets for Brazilian iron ore are Europe with 81.5 Mt and the Far East, represented by China, Japan, the Republic of Korea and Taiwan Province of China, with 145.1 Mt. Exports to rest of the world were 55.1 Mt. Exports to European markets rose by 2.0 % in 2008 and exports to the Far East decreased by 1.0 %. Vale S.A. (Vale) formerly Cia Vale do Rio Doce (CVRD) changed its name in May 2009. The company was rebranded Vale already in 2008 but in 2009 the legal name was also changed. Vale is by far the largest producer in Brazil and in the world. According to the company the production of iron ore and pellets reached 301.7 Mt in 2008, a decrease of 0.5 % from 2007. In 2007 Vale produced 203.1 Mt from its Southern and Southeastern system, i.e. the mines in the state of Minas Gerais. In 2008 this figure had gone down 3.6 % to 195.9 Mt. In the Vales Northern system, i.e. the Carajás operations, production reached 96.5 Mt in 2008, up from 91.7 Mt in 2007. Production of pellets was 44.8 Mt in 2008, the same as in 2007. Ferteco Mineracao ceased to be an independent producer in 2001 and is included in the figures for Vale and associates.

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Mineracoes Brasileiras Reunidas (MBR) used to be Brazil's second largest iron ore producer. It is controlled by Vale and the mines of MBR have now been incorporated into the Southern System of Vales iron ore mines. The production at the mines was 60.0 Mt in 2008 accounting for approximately 17 % of total Brazilian output in 2008. This means production decreased with 12 % compared to 2007 when production was 68.3 Mt. Traditionally 85 % of MBR’s production has been exported, an export that reaches almost all continents with China as the main destination. Production by Samarco Mineracao was 18.5 Mt in 2008. Current annual production capacity of pellets is 13 million tons. Samarco operates three pellet plants. The first went into operation in 1977. In December 1997 production capacity was doubled by the addition of a new plant and in 2008 a third pellet plant was commissioned. Pellets make up an increasing proportion of its production and there are plans for a fourth pellet plant that would raise capacity by 40 %. Companhia Siderúrgica Nacional (CSN), which operates the captive Casa de Pedra mine in Minas Gerais, had a production in 2008 of 18.8 Mt. This represents an increase from last year of 25 %. MMX Mineracao e Metalicos SA, owned by EBX Group, is an emeerging producer with two operating properties, MMX Sudeste System, and the MMX Corumbá System, as well as ownership in IronX which operates the Amapa mine together with Anglo American. In addition to these larger mines, a few other Brazilian producers of iron ore, including V & M Mineracao, Mineracao Rio Verde, Mineracao Corumbaense Reunida and Mineracão J. Mendes Ltda, together produced some 7-8 Mt in 2008. There are also a large number of smaller producers delivering their production to Vale and to local pig iron producers. These companies have become much more active in the last year or two following the clearance obtained by CSN to export its ore over the railways earlier controlled by Vale. Some of them have been acquired by foreign companies wanting to gain a foothold in Minas Gerais. At present little information is available.

CHILE Chile has one iron ore producing company, CMP Cia Minera del Pacífico, which produced 8.4 Mt in 2008, an increase of 7.1 % compared to 2007. CMP is a wholly owned subsidiary of the Chilean steel producer CAP in which Mitsubishi Corp. has a 12.5 % shareholding and Invercap SA has 31.3 %. Generally, iron ore exports in Chile have been falling since 1997 when they peaked at 7.1 Mt. In 2005, however, exports rose by 6.4 % to 5.9 Mt only to fall again in 2006 to 5.8 Mt, In 2007 exports increased again to 6.7 Mt, only to fall in 2008 by 19 % to 5.4 Mt. Pellets production was unchanged but exports increased sharply. The pellets share of total exports is now back to around 70 % as it was in 2005. In 2007 it was only 45 %. The major market for Chilean iron ore is Asia where 95 % of 2008 exports went. The most important countries are, in order of importance: China, Japan, Indonesia and Malaysia. CMP mining operations are divided into two production areas: Elqui Valley with the Romeral mine and Guayacan port; and Huasco Valley with the Agarrobo and Los Colorados mines. The Agarrobo mine has begun its depletion phase and the Los Colorados mine is replacing it.

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There are several iron ore projects being considered in Chile, most of which belong to CAP. Among the most interesting are the La Candelaria Tailing Deposit project which will take care of the tailings from La Candelaria copper mine.

COLOMBIA

Colombia has three small captive mines, el Banco, el Uche and el Uvo, all of them operated by the privately held steel company Acerias Paz del Rio. Production has increased over the last years but has not reached above 1 Mt.

MEXICO Mexico’s iron ore production in 2008 was 11.5 Mt (preliminary figure); this represents an increase of 5.5 % compared to last year’s production of 10.9 Mt. Imports increased by about 24 % to 3.9 Mt in 2008. Almost all of the imports, or 69 %, come from Brazil. Other countries exporting to Mexico are Peru, the United States, Trinidad & Tobago, Canada, and Venezuela. Among the producers of iron ore in Mexico are Minera del Norte SA de CV, which owns the Hercules mine; Consorcio Minero Benito Juárez Peña Colorada with the Peña Colorada operation; Cia Minera las Encinas SA de CV, which owns and operates the Aquila mine and the Nahuatl mine and ArcelorMittal Lázaro Cárdenas. Arcelor Mittal has increased its interests in the Mexican iron ore industry lately through its subsidiary ArcelorMittal Lázaro Cárdenas. In December of 2006 the company acquired Sicartsa, in April of 2007 the acquisition was completed and the largest steel maker of Mexico was formed. It now controls through ownership or long term contracts on cost plus basis 100 % of the mines Las Truchas and Volcan, the latter commenced operation in 2008, and 50 % of the Peña Colorada mine. The Peña Colorada mine is operated by Consorcio Minero Benito Juárez Peña Colorada. Mexico exports some of its iron ore, mainly to China. In 2008 total exports were 1.9 Mt, of which 1.1 Mt or roughly 60 % went to China.

PERU Peru’s only iron ore producer, Shougang Hierro Peru SA., fully owned by the Chinese state controlled Shougang Group, which operates the Marcona open pit mine, produced 7.9 Mt during 2008, the same amount as last year. In 2008, almost 91 % of the total production, or 7.2 Mt, was exported. This represents a decrease in exports of about 2.3 % from the 7.4 Mt exported in 2007. China received 5.4 Mt or 75 % of total exports. Other important destinations are Japan, Mexico and the Republic of Korea. Exports to all of these countries decreased in 2008 while exports to China increased. Pellets production has been gaining in importance in Peru but since 2007 production has decreased. In 2008 it fell by 16 %. Of the total production roughly 30 % was pellets, a decline from the 35 % last year. Exports of pellets have decreased over the last years and in 2008 they declined by 14 %. A couple of

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early stage iron ore projects in Peru are under way as well as an expansion of the Marcona iron ore mine.

VENEZUELA

In 2008, Venezuela produced some 21.5 Mt of iron ore, an increase of 3.9 % from 20.7 Mt in 2007. There are three iron ore mines in Venezuela: Las Pailas, Los Barrancos and San Isidro. They are open pit mines and the state controlled company CVG Ferrominera Orinoco operates all three. Venezuela exported around a fourth of its production in 2008. Exports have decreased the last few years and 2008 was no exception. Some 5.5 Mt were exported, mainly to China but also Europe had its share. This represents a decreased of 16 %. Venezuela is estimated to have produced 7 Mt of pellets in 2008. The pellets plant operated by Ferrominera has a capacity of 4 Mt and Sidor, a privately owned steel producer, provides the balance. Sidor buys ore from Ferrominera for its pellets production. Venezuelan exports of iron ore goes mainly to Asia and Europe. China is the single largest importer with 2.9 Mt in 2008, down 23 % compared to 2007. The most important customers for Venezuelan iron ore in Europe are Belgium with 0.9 Mt, the Netherlands with 0.3 Mt, the United Kingdom with 0.3 and Spain also with 0.3 Mt.

ASIA

CHINA After seven years of consecutive increases of production in China the production for 2008 stayed the same as in 2007. Production of run of mine ore as reported by CISA was 824 Mt. The average grade of Chinese iron ore output is reported to be steadily but slowly declining and was around 30 % in 2004, varying from as low as 12 per cent to 56 per cent in a few high grade mines. During the last years the average grade of iron ore has probably gone down as most capacity expansion has taken place in the small mines. In the calculations carried out for this report the figures are adjusted for the lower grade in order to obtain a figure for Chinese iron ore production that is comparable to data for the rest of the world. With this conversion the corresponding concentrate grade would be 64 %, which is the actual reported average concentrate figure. Detailed Chinese statistics, which are available for the major mines, give both run of mine ore and concentrate volumes. Summary statistics are available for medium size and small mines. When analysing the Chinese situation one of the major difficulties concerns the apparent discrepancy between the iron content of the pig iron produced in China and the reported iron units supplied by imports and local mine production. This discrepancy was particularly important in 2008 and led to considerable confusion, since it appeared that a lot more iron ore was produced locally than could reasonably be needed. In order to try to clarify some of these aspects the demand for iron units has been calculated based on the amount of pig iron produced during the latest eight years. The starting point is that pig iron production figures should be more reliable both with respect to volume and iron content than the iron ore production and grade figures. In Table 3 it is assumed that the iron content of pig iron is 94 %

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and that the grade of imported iron ores is 63 %. The iron content actually needed from domestic suppliers in order to produce the reported pig iron is then calculated.

Table 3. Chinese iron ore production revisited: discrepancies in statistics (Mt)

Gross

volumeIron

content 1. Pig iron production 468 440 2. Imported ore (63% Fe) 444 280 3. Calculated need for domestic ore (1-2) 160 4. Stock build-up 25 5. Loss in concentration 12 6. Loss in transport 9 7. Loss in steel making 21 8. Adjusted domestic ore need (3+4+5+6+7) 227 9. Reported ore production (8 at 27.5 % Fe) 824 10. Ore production adjusted to 63 % Fe 362

Sources: CISA actual pig iron, imported and domestic ore figures. All assumptions about iron content are made by Raw Materials Group in cooperation with Jacques Astier. As seen from table 3, these calculations imply that 160 Mt of iron would have been needed from the domestic mines. According to official statistics, however, production of run of mine ore was 824 Mt, meaning that the iron content would have been 19 %, rather than the usually estimated 25-30 %. Several explanations are possible and they all contribute to the apparent discrepancy. The consequent adjustments are shown in table 3. Stock variations are one obvious explanation. Stocks built up in late 2008 as a result of ore deliveries having been scheduled before the steel industry reduced its production rate. Stocks in major ports were reportedly 61 Mt at the end of 2008 and some reports put them as high as 100 Mt. It is estimated that the stock build-up in 2008 was 25 Mt Fe, or about 40 Mt of iron ore at internationally traded grades. Some iron is lost in concentrating iron ore to a grade that can be used by sinter or pellets plants. This loss has increased as a portion of total ore production since the expansion of Chinese iron ore mining has entailed bringing many low grade deposits into operation. Thus, a larger portion of ore production needs to be concentrated and, as average grades decline, proportionally more is lost in processing. The total loss in the concentrating process in 2008 is estimated at 12 Mt iron content. Some material is also lost in transport. It is estimated that this amounted to 9 Mt in 2008. Finally, some iron is also lost in steel making. In 2008, this loss is estimated at 21 Mt Fe. The calculations in table 3 show that when the factors just described are taken into account, the need for domestic production increases by 67 Mt of Fe to 227 Mt, corresponding to 824 Mt reported at an inferred grade of 27.5 % and 362 Mt when converted to internationally traded ore at 63 %.

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Two other factors may be important: average ore grades may have fallen in 2008 compared to previous years and improvements in official statistics may mean that production has been underestimated earlier, resulting in an exaggerated estimate of ore grades. The production figures shown in table A1 have been adjusted for considerable under reporting in 2007 (which is not too surprising, considering that the boom in iron ore production resulted in many marginal deposits being brought into production, presumably taking statistical agencies by surprise). Production figures have also been adjusted to take into account a gradual fall in the grade of run of mine ore from30 % Fe in 2004 to 27.5 % in 2008. A number of important conclusions can be drawn from this discussion:

• Local iron ore production in China has been and continues to be much more dynamic than both outside observers and Chinese authorities believed to be possible. Production has been growing faster than what has been generally assumed. With the high prices of imported ores domestic production flourished until late 2008.

• The average grade of Chinese production is likely to be lower than the 30 % often assumed because it would be difficult to find high grade ores to replenish depleting reserves and any additional reserves that have been exploited are likely to have been of lower grade than the existing ones.

A factor complicating the analysis is the possibility of some volumes of imported ores not being registered in the import statistics, perhaps from neighboring Vietnam or Democratic People's Republic of Korea, and, more recently, Mongolia. These volumes should however not be significant and the iron content of these ores is probably lower than those of ores from Brazil and Australia. The booming local iron ore industry had a somewhat dampening effect on the demand for imported ore. But the small scale iron ore mines in China are for the most part high cost operations. With falling prices a large portion of production will have to close down. Some claim that 40 – 60 % of the small scale iron ore mines in China have already been closed. At the same time it is important to note that the iron ore content of the large and medium size mines are not worse than for example the iron ore mines in the United States. China is by far the world’s largest importer of iron ore, accounting for 49 % of total imports in 2008, when imports were 444.0 Mt, an increase of 16 % from 383.1 Mt in 2007. Imports represented approximately 45 % of China’s use (corrected for the lower iron content of local ores as described above), unchanged from 2007. It is widely believed that China's dependence on imports will increase. Iron ore produced in China is usually of inferior quality to the imported ore, and dependence on imports increases when prices fall. The specific geological parameters of China, with few and small high grade deposits, have to a large extent determined the structure of the Chinese iron ore industry. Forty-nine mines, which are all classified as “major mines”, account for only 23 %, or 188.2 Mt of total production, while ”medium & small” mines produce a much larger quantity of iron ore at more than 636 Mt according to official statistics. There are over 8 000 iron ore mines in total. In the official statistics, 3,867 are mentioned, of which 34 “large” mines, 43 “medium”, 1407 “small” ones and 2 383 “very small” operations. The “large” mines account for 45 per cent of total production, “medium” 11 per cent, “small” mines 17 per cent and the “very small” operations 27 per cent.

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The major and medium size mines often have higher grades, producing concentrates of a quality comparable to the imported ores. The small and medium mines in general have inferior deposits and less stringent quality controls. The ten most important mining entities are shown in table 4. Not only is the number of iron ore mines in China huge, the number of corporate entities is also high. Most major and medium sized mines are operated as captive mines and are owned by the major steel companies. These are in turn still mostly state owned. Only a few of the major or medium mines are independent. 271 state owned enterprises account for 65 per cent of the production, while 1,507 collectives produce 14 per cent and the remaining 21 per cent is mined by over 2,000 privately held entities. China is the most dynamic force in the global iron ore market at present and will continue to play that role for years to come. With steel demand slumping across the globe China continues to increase its production, although at a slower pace than in recent years (the World Steel Association forecasts a slight decrease in production for 2009 but statistics so far suggest a slight increase). Falling prices and good availability of good quality imported iron ore means that local production is likely to decline substantially. Imports will therefore grow in 2009. China has two alternative ways of securing its import needs:

• Investing in joint ventures in iron ore production abroad • Securing long-term contracts at set price levels

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Table 4. Major iron ore mining companies of China 2007 2008 Iron ore Concentrate Iron ore Concentrate (Mt) 1 Anshan Iron & Steel Corp. 42.51 14.50 47.73 16.86

Dagushan mine Dong’anshan mine Yanqinanshan mine Qidashan mine Gongchangling mines Anta mine Anqian 2 Benxi Steel 16.25 6.33 16.66 6.28

Nanfen mine Waitoushan 3 Panzhihua Iron & Steel Corp. 11.70 5.01 16.20 6.20

Lanjian mine Zhukuang mine Baima 4 Baotou Iron & Steel Corp. 12.67 4.76 12.90 4.72

Baiyun mine Gongyiming 5 Taiyuan Iron & Steel Corp. 11.24 4.36 12.29 1.06

Ekou mine Jianshan mine 6 Shougang Corp. 8.43 4.63 9.31 5.01

Dashihe mine Shuichang mine Xunshan 7 Ma’anshan Iron & Steel Corp. 8.53 2.84 9.04 2.57

Nanshan mines Ao'shan Dongshan Gaochun mine Gushan mine Taochong mine 8 Hanxing Mines 5.58 2.88 6.01 2.75

Fushan Yushiwa Kuangshancun Yuquanling Xishimen Tuancheng Beiminghe Gaoyang Nuopu Kaifa 9 Wuhan Iron & Steel Corp. 4.72 3.31 5.05 3.66

Daye mine

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Jinshandian mine Chengchao mine 10 Shanghai-Meishan 3.48 2.21 3.36 2.07

Shanghai-Meishan Source: China Metallurgical Newsletter, 2009.

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Table 5. Selected iron ore operations outside China with Chinese ownership Mining projects Location JV shares Cloud Break Western Australia Fortescue

Baosteel Group

Eastern Range Iron Ore Western Australia Hamersley Iron 54 %

Baosteel Group 46 %

Karrara Project Western Australia Gindalbie Metals

Anshan Iron & Steel 12.7 %

Cape Lambert South Western Australia MCC

Evraz

CITIC Pacific Sino Iron Project Western Australia CITIC Pacific Mining

MCC

Balla Balla Iron Ore Western Australia Aurox Resources

RockCheck Steel Group

Wheelarra Project Western Australia BHP Billiton Group

Wugang

Maanshan

Jiangsu Shagang

Tangshan

Channar Iron Ore Mine Western Australia Hamersley Iron 60 %

Sinosteel 40 %

Koolanooka, Weld Range, Jack Hills Western Australia Sinosteel

Tallering Peak, Extension Hill, Koolan Island Western Australia Mount Gibson Iron

Shougang Group

Central Yilgarn Iron Ore Project Western Australia Jupiter Mines

Haoning Group

Southdown Magnetite Project Tasmania, Australia Grange Resources

Kemama Pellet Project Australian Bulk Minerals

Savage River Operations Stemcor

Jiangsu Shagang

Francis Creek Iron Ore Northern Territory, Australia Territory Resources

Noble Group

Bungalow Magnetite Iron Ore Deposit South Australia Centrex Metals

Baotou Steel

Southern/ South central Iron Ore Deposit South Australia Centrex Metals

Wuhan Iron & Steel

Wilcherry Hill/ South Australia Iron Clad

Hercules Iron Ore Deposit Wuhan Iron & Steel

Cairn Hill Project South Australia IMX Resources

Tonghua Iron & Steel

Wiluna West Iron Ore Project South Australia Golden West Resources Ltd.

Hunan Valin Steel Tube & Wire Co

Cambodia Iron Ore Cambodia WISCO

Baosteel

AnSteel

Shougang Group

Madagascar Resource Development Project Madagascar WISCO

Jinxing International

Belinga Iron Ore Project Gabon Chinese Consortium

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As in the past, both routes will be used to secure future supplies. A supplementary alternative is to start grass roots exploration for iron ore and three years ago the Ministry of Finance established a special fund for overseas exploration to secure the raw materials needs of Chinese companies. So far, however, most of these funds have been used for M&A activities abroad and the exploration activities have been low key. It is probable, however, that exploration activities will become much more important and it is only a matter of time before green field discoveries will be made by Chinese exploration companies. In Africa, Chinese exploration for iron ore has been reported from a few countries, including Algeria, where the Gara Djebilet project has been studied. In Gabon, where China National Machinery & Equipment Import & Export Co was cooperating with CVRD and Eramet until mid 2006 in the Belinga project, the other partners were ousted when the Chinese offered a 500 MUSD facility towards the construction of a port and railway.

INDIA India is the world’s fourth largest producer of iron ore. Its iron ore production has increased continuously over the last nine years and in 2008 it rose by 3.4 %, to 214.0 Mt, compared to 206.9 Mt in 2007. Exports of iron ore increased by 8.2 % to 101.4 Mt, up from 93.7 Mt in 2007. Indian producers and exporters have been quick to exploit the exceptionally profitable spot market opportunities created by rapidly growing Chinese demand. Since 1996 exports to China have increased from 4.3 Mt to 91.0 Mt. On the other hand, exports to Japan fell by 57 % between 1999 and 2008. The entire increase in production of iron ore since 2003 was export driven and came from existing mines. No major green field project has been undertaken in India for more than two decades. Production is spread all over India. Chhattisgarh, Karnataka, Orissa, Jharkand and Goa are the most important iron ore producing states. Chhattisgarh used to be the largest producer of iron ore, but in 2002 both Karnataka state and Orissa overtook it and in 2007 Orissa state was the most important iron ore producing state in India. Statistics from India are published later than in the rest of the world and hence no detailed figures for 2008 are available at the time of writing. Moreover, the non-calendar fiscal year of India, which is also used in statistics, causes problems when comparing Indian statistics to data from other countries. The Indian iron ore sector is highly fragmented. Most mines are small compared to other iron ore mines in the world. In 2007 there were 261 reported iron ore mines in India. Some of the larger are Bailadila 14 iron ore mine, Bailadila 6 iron ore mine and Donimalai iron ore mine, all three owned by National Mineral Development Company (NMDC) which controlled production of 28.2 Mt in 2007; Dalli, Bolani, Kiriburu and Meghahataburu iron ore mines, owned by Steel Authority of India (SAIL) with a controlled production of 26.2 Mt in 2007. Both companies are controlled by state or central government. Kudremukh iron ore mine, owned by Kudremukh Iron Ore Company (KIOC) was forced to close its operation by December 31st 2005 because new permits were not granted for the operations, which are partly located in environmentally protected areas. Other large iron ore mining companies are: Essel Mining & Industries Ltd. With a controlled production of 14.9 Mt in 2007, Sesa Goa with 11.6 Mt and Tata Iron & Steel Co (Tisco) with 11.4 Mt originating from mainly two mines, Noamunid and Joda East. Captive mines accounted for 23 % of total production in 2007 down from 33 % in 2005 but the same as the year before. The private sector, with 62 % of total production in 2007, contains a much larger number of companies. There were some

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80 mining leases actively operated in Goa in 2007-2008. All producers use the same export facilities but apart from that they are all independent. India is a relatively important producer of pellets, and both production and capacity have been increasing over the last couple of years. In 2008, production reached its highest level to date at an estimated 17.5 Mt, which is close to the capacity ceiling. Exports of pellets increased to 5.5 Mt in 2008 but are still lower than the 7.3 Mt reached in 2005. About 65 % of pellets exports go to China.

IRAN

Iranian iron ore production was estimated to be 20 Mt in 2008, 9.1 % lower than in 2007. This marks the end of the increasing trend which began in 2003 when production was only 11.5 Mt. Iranian imports of iron ore decreased slightly last year and amounted to 1.1 Mt. Exports in 2008 was estimated to be 3.8 Mt, a decrease of 4.7 % compared to 2007. Iran has two major companies involved in iron ore mining: the state owned National Iranian Steel Co (NISCO), which controls the Sangan and Shamsabad mines; and the Iran Minerals Production & Supply Co, also owned by the state, which controls the three most important mines in Iran, the Chogart mine, the Gol-e-Gohar mine and the Chadormalu mine. Both the Chogart mine and the Gol-e-Gohar mine are in the process of expanding capacity. In addition to these major mines, there are also a number of smaller mines producing altogether not more than 0.5 Mt. Plans to increase iron ore production further have been proposed but expansion has been slow and with the current uncertainty in the iron ore market most of these projects will probably be put on hold.

JAPAN

Japanese iron ore imports rose again in 2008, from 138.9 Mt in 2007 to 140.4 Mt, up 1.1 %. Japan was for a long time the world’s largest importer of iron ore, but in 2003 it was overtaken by China. Together the two countries imported 584.4 Mt of iron ore in 2008, accounting for more than 60 % of total world imports of iron ore. The most important source of Japanese iron ore imports is Australia with 82.2 Mt in 2008, down 1.3 % on 2007. Australia represented roughly 60 % of Japan’s total imports. Imports from Brazil were 36.3 Mt in 2008, up 18 %, and representing around 26 % of total imports. India supplied 6.9 Mt, down about 13 %, and accounted for 4.9 % of total imports. South Africa with 6.6 Mt, up 2.4 %, represented 4.7 % of total imports. In February 2009 the Japanese government through Japan Oil, Gas and Metals National Corporation (Jogmec) supported Japanese companies' access to iron ore overseas for the first time. Jogmec provided loans to Sojitz and Itochu amounting to a total of 1.09 billion JPY to respectively carry out a feasibility study of the Southdown magnetite project on the southern coast of Western Australia and do a first resource estimate of the Roper Bar project in Northern Australia. Jogmec has traditionally only engaged itself in base metal and ferro alloying metals projects.

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REPUBLIC OF KOREA Iron ore production in the Republic of Korea has been fairly constant at around 0.2 Mt during recent years. In 2008, estimated production was 0.2 Mt. There is only one iron ore mine in operation: Sinyemi, owned by a local Korean company. Production is used for non-steel purposes In 2008, the Republic of Korea became the worlds’ third most important iron ore importing country with imports of 49.5 Mt, up 7.3 % from 2007. Australia and Brazil are the two most important sources. Imports from Australia in 2008 were 34.1 Mt, up 9.5 % from 31.2 Mt in 2007, and from Brazil 12.1 Mt, up 17 % from 10.4 Mt in 2007.

TAIWAN PROVINCE OF CHINA Taiwan province of China has no iron ore mines. Imports in 2008 were 15.6 Mt. Since the year 2000, imports have been quite stable at around 15 Mt. Australia accounted for 10.9 Mt or 70 % of imports in 2008, up 5.8 %. Imports from Brazil were 4.0 Mt or 26 % of total imports, down 11 % on 2007. The third most important supplier country was Canada with 0.5 Mt or 3.2 % of imports. Together these three countries account for almost more than 99 % of Taiwan province of China’s total iron ore imports.

TURKEY The production of iron ore in Turkey was estimated to be 3.7 Mt in 2008. There are four regions suitable for iron ore mining in Turkey: Sivas-Malatya-Erzinca, where two thirds of Turkish iron ore is produced, Kayseri-Adana, Ankara-Keskin and Western Anatolia. These four regions are estimated to have some 150 Mt of resources with an average of 55 % iron content. At present there are approximately 20 iron ore mines in production. Divrigi Hekimhan Mining Concerne with its 14 iron ore deposits was acquired by Erdemir in April 2004. The company was renamed Erdemir Madencilik Sanayi ve Ticaret AS shortly after. Erdemir Maden located in the Divrigi province of Sivas is responsible for 50 % of Turkey’s iron ore production and meets 20 % of domestic demand. The operation has a capacity of 2.2 Mt run of mine ore. Erdemir Maden also operates Turkeys only iron pellet plant with a capacity of 1.5 Mt. In 2006 Erdemir Maden produced 1.1 Mt of pellets and 0.7 Mt of other iron ore products. Iron ore production has been stable at around 3.5-4.5 Mt during the last ten years. Imports have been growing slowly during the same period and reached 6.9 Mt in 2008, up 12 % from 2007. There are three vertically integrated steel mills in Turkey which control iron ore production,: Kardemir, Eregli Demir ve Celik Fabrikalari T.A.S. (Erdemir) and Iskerderun Demir ve Celik A.S. (Isdemir). Kardemir, which was established already before the Second World War, is the oldest. Erdemir became the second Turkish steel works when it was founded in 1965, while Isdemir followed ten years later. Kardemir is privately owned and has a capacity of some 1 Mt of crude steel. Erdemir and Isdemir were merged in 2002 when Isdemir was privatized. They have a joint crude steel capacity of a little less than 5 Mt. Total iron ore consumption at combined Erdemir and Isdemir is 7 Mt/year while demand at Kardemir is between 1-1.5 Mt annually. The privatisation of the remaining 46 % of Erdemir still owned

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by the Government has been postponed several times. In late 2005, Arcelor, which already holds a 5 per cent stake, made an agreement with the Turkish pension fund Oyak to acquire jointly 49.3 per cent of Erdemir, but when Arcelor was not granted approval from the Turkish Competition Board in time, Oyak completed the acquisition on its own. Mittal Steel and competing Global Steel Holdings have also shown interest in the Turkish privatisation. Isdemir has captive mines at Divrigi and Hekimhan, the latter producing manganese rich ores. These are the most important mines in Turkey, accounting for 50 to 60 % of total production. The Kafa mines in the Divrigi district together have a capacity of some 1.5 Mt of iron ore including pellets. The capacity of manganese ores at Hekimhan is around 650 kt/y. The second most important iron ore region contains the Attepe and Mentes mines, which have a total capacity of some 1.2 Mt, equal to about 30 % of total production.

OTHER ASIA

There is some production of iron ore in Indonesia, Malaysia, Thailand and Vietnam. The mines in these countries are small in scale. Together their estimated production was 3.5 Mt of iron ore in 2008, more or less the same figure as for 2007. Production in the first three countries is mainly for non-steel uses, but the high prices of the last years have also stimulated exports to China. The Vietnam Steel Corporation, which is operating the mines Trai Cau, Nui De, NaLung and Ham Chim, dominates Vietnamese iron ore production. There are some projects in progress in Vietnam but even after these are completed the total output of iron ore will still be fairly low. Exports to neighbouring China have already begun at a level of some few hundred thousands of tonnes. The balance of Vietnamese production goes to local steelworks. The Democratic People's Republic of Korea used to have an industrial scale iron ore capacity of as much as 10 Mt in the 1970s and 1980s. Due to lack of maintenance and replacement investment, capacity has slowly dwindled. During the early 2000s production was minimal. It has been reported that three to four larger mines, with the open pit Musan being the biggest, are under rehabilitation and the authorities are investing in new equipment and upgrading the transport facilities from the mine both to local steelworks and for exports to China. At this stage the only producing mine is Musan. Development of the country’s iron ore industry may be speeded up after the influential and financially strong Chinese trader and miner China Minmetals has taken a direct interest in its development. Production has increased during recent years and is at present estimated at around 1 Mt.

OCEANIA

AUSTRALIA Australia is the world's second largest producer and the largest exporter of iron ore. Production rose by 17 % in 2008 compared to 2007 and exports grew by 16 %. Australia’s total production reached 349.8 Mt while exports grew to 309.3 Mt. Exports to Japan decreased by 0.7 % in 2008 and were 76.8 Mt, down from 77.3 Mt in 2007. Exports to the EU decreased by 5.3 % and were down to 5.9 Mt in 2008. By contrast, exports to China grew by 29 % and reached 183.2 Mt in 2008. Since 1999, exports to China have grown by more than

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560 %. Exports to the Republic of Korea are also increasing and in 2008 they amounted to 33.3 Mt, up 9.2 % compared to 2007. Rio Tinto is the largest of the iron ore mining companies in the country and ranked fourth among mining companies in the world over all. In its wholly owned Hamersley operations, which include Mount Tom Price, Brockman, Homestead, Nammuldi, Paraburdoo, Marandoo and Yandicoogina iron ore mines, the company produced 95.6 Mt in 2008, up by 1.0 % from 94.6 Mt in 2007. The Channar iron ore mine is a joint venture between Hamersley, which owns 60 %, and China Iron & Steel & Trade Group Corp, which owns 40 %. The mine produced 10.4 Mt in 2008, down 1.6 % from 10.6 Mt in 2007. Eastern Ranges iron ore mine project was put into production in the beginning of 2004. In 2008 it produced 8.2 Mt, up from last years’ 6.9 Mt. The mine is expected to have a capacity of 10 Mt per year when in full production. Eastern Ranges is owned by Hamersley (54 %) and Shanghai Baosteel Group Co Ltd (46 %). Robe River Iron Associates is another of Rio Tinto's iron ore operations. In 2008 the iron ore mines Pannawonica, Pannawonica Deposit J and West Angelas produced 50.3 Mt, down from 51.5 Mt in 2007. The Robe River joint venture, originally between North Ltd and a Japanese consortium, is now controlled jointly by Rio Tinto, Mitsui & Co Ltd, Sumitomo Steel and Nippon Steel. The other major producer of iron ore in Australia is BHP Billiton. The company operates the wholly owned Jimblebar iron ore mine and the joint ventures Yandi, Mt Neewman, Goldsworthy and Area C iron ore mines. The total production from these mines was 127.4 Mt in 2008, compared with 111.6 Mt in 2007, an increase of about 14 %. Fortescue Metals Group, which shipped the first iron ore from its Cloud Break Iron Ore Mine in Western Australia in May 2008, after a record breaking short project implementation time, has become the third largest producer of iron ore in Australia. Total production reached 19.5 Mt in 2008 with ramping up to come. There are also some smaller producers of iron ore in Australia. One Steel Ltd, spun off from BHP Steel with its Whyalla iron ore mine, has produced between 3.5 and 5 Mt for the last couple of years. In March 1997, ABM purchased the assets of the Savage River Project from the Tasmanian Government. The operation is designed to produce around 2.5 Mt annually of pellets. One Steel’s long term plan is to reach a capacity of some 6.0 Mt/a of iron ore production by 2010. In 2009 Grange Resources Ltd. acquired the Savage River Iron Ore Mining operations. The mine, which has changed owners several times during the last couple of years, was meant to cease mining in 2009 due to depletion. However a feasibility study performed in 2006 showed that the mine life could be extended to 2023. The operation is designed to produce around 2.5 Mt annually of pellets. Portman, which operates two mines, the Koolyanobbing deposit with an output of 7.3 Mt in 2008 a slight decrease from last year, and the Cockatoo Island mine, which produced 1.4 Mt in 2007 but only 0.8 Mt in 2008, is controlled by Cleveland Cliffs (80.5 %) which took it over in the first half of 2005.

NEW ZEALAND New Zealand has two beach sand operations located in the same area on the west coast of the north island, Waikato North Head and Tahoroa. The two operations are owned by New Zealand Steel and produce iron ore sand, both for export and for local consumption at the company’s steel works at Glenbrook, south of Auckland. New Zealand Steel is in its turn

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controlled by Bluescope Steel, which was spun off from BHP in the early 2000s. In 2008 the two mines are estimated to have produced 2.3 Mt. In 2008, New Zealand’s exports declined by 20 %, and are now 0.5 Mt. Exports were traditionally shipped to Japan but in recent years China’s importance as an importer has been growing and it is now by far New Zealand’s most important foreign customer. In August 2008 Bluscope Steel announced an agreement with Cheung Kong Infrastructure on the sale of its Taharoa Iron Sands Business for 250 MNZ. In December 2008 the deal was however refused by the New Zealand Overseas Investment Office and Cheung Kong Infrastructure consequently cancelled the purchase contract.

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IV. COMPANIES IN THE GLOBAL IRON ORE INDUSTRY

CONSOLIDATION Brazilian Vale still holds the position as the undisputed largest iron ore producer of the world. In 2008 Vale controlled 303 Mt of iron ore production. This was the first decline in many years, down from a high of 308 Mt in 2007. Vale's share of total world production was 17.3 per cent in 2008, down from 18.8 per cent in 2007. The decrease was due to both drastic cuts in production in the last quarter because of the collapse in the North American and European steel markets, which hit Vale harder than its Australian competitors, and to the quick growth in total world production resulting from higher production in Western Australia and South Africa. The frantic expansion rate of the iron ore industry becomes clear when looking back and realising that it was only in 2004 that the then CVRD’s production exceeded 200 Mt for the first time. The three largest companies, including Rio Tinto and BHP Billiton in second and third place, with most of their production in Australia, together controlled 33.7 per cent in 2008. The market share of the "Big Three" decreased by more than 1 percentage unit (22 Mt) from 2007. Rio Tinto increased its production by only 8 million tonnes after having cut down in the last quarter and this resulted in a marginal loss of market shares down to 8.7 per cent. BHP Billiton, in third place, did not reduce production but increased its total output by 15 Mt instead and its market share to 7.8 per cent. The “Big Three” have not managed to increase their production quite as fast as total world production and their share has now fallen from a high of 36 % to less than 34 %, mainly because of a fast expansion by small producers in India and China in 2005-2007 and in late 2008 also because of cuts in production. Corporate concentration in the iron ore industry at the level of the largest, the three largest and the ten largest companies therefore fell in 2008. The long continuous trend of increasing concentration seems to have been broken. It is however not at all certain that this reversed trend will be confirmed. It is mainly due to both Vale and Rio Tinto having taken leading roles in cutting production to support prices. They will both be ready to increase their production sharply should demand increase. It is further likely that a severe fall in Chinese domestic production with widespread mine closures - the Great Chinese Shakeout - will take place in the next few years. These two factors could help catapult the total share of production controlled by the Big Three back to or even beyond the top levels of 2003-2005 in a few years time. The iron ore industry has been consolidating more or less continuously since the 1970s (see Table 6) and the process of consolidation has been more or less completed, except in the CIS countries and China. But the concentration process has been by leaps and bounds. The pace has been slow in periods of only organic growth, such as the late 1990s, but much faster in times of intensive merger and acquisition (M&A) activity, for instance, between 2000/03 and in 1997 when CVRD was first privatised.

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Table 6. Iron ore market consolidation 1975-2007 Market share of largest producers % of total world production 1 3 10 2008 17.3 33.7 48.4 2007 18.8 34.9 50.7 2006 18.2 34.7 51.2 2005 18.5 36.4 54.4 2004 18.5 36.3 53.4 2003 17.8 36.1 54.1 2002 14.5 30.0 46.5 2001 15.5 32.0 47.5 2000 11.7 26.2 42.7 1995 9.5 21.0 37.2 1990 8.7 17.8 33.2 1975 5.3 11.3 26.8 Source: Raw Materials Data, Stockholm 2009. Note: For details of the methodology used see Who owns Who in Mining, Raw Materials Group, 2001.

In spite of recent years’ attempts to create larger steel companies through M&A activities, the iron ore producers are still one step ahead of the steel producers. But the gap is steadily shrinking, both because of continued M&A in the steel sector and because of decreasing concentration in iron ore. The ten largest crude steel producers control around 27 per cent of world production while for iron ore the figure is 51 per cent. The iron ore industry’s level of concentration is roughly on par with the average for other metal industries. It is interesting to note that only one of the top five (but four of the top ten and six of the top twenty) steel companies are Chinese in spite of the fact that China accounted for almost 38 per cent of world crude steel production in 2008. Another way of expressing the level of concentration is to use the Herfindahl- Hirschman Index (HHI). This is the sum of the squared market shares of each company, a standard tool used by the worlds’ antitrust watchdogs. The index is a function that summarises the structure of an entire industry. or the ten largest controlling iron ore companies the index is 470 down from 523 in 2007 and from a high of 562 in 2005, which is far below the 1 000 mark that the United States Federal Trade Commission uses as the lower limit for a "moderately concentrated" market.

MERGERS AND ACQUISITIONS The mergers and acquisitions (M&A) activity dropped considerably towards the end of 2008 and has remained on a low level since then. After a period of limited M&A activity during 2004-2005, the period of high prices combined with the abundance of cash in both mining and steel companies triggered another M&A wave in 2006 which continued all through 2007 and ended in mid 2008. The hostile and drawn-out take-over bid by BHP Billiton for Rio Tinto clearly dominated the M&A scene in the mining sector during most of 2007 and into the second half of 2008 until the bid was finally withdrawn by BHP Billiton in November 2008. BHP Billiton claimed that

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the deal was no longer in the interest of its shareholders but maintained that the benefits of combining the iron ore assets (and other assets) of the two companies still made sense. With sharply falling metal prices the risks associated with the bid simply became too big. The bid, valued at around 150 billion US dollars, was the largest ever in the history of mining. One of the key objectives for BHP Billiton was to be able to consolidate the Western Australian iron ore industry and coordinate the operations of the two companies in this important iron ore region. Although a large part of the value in the bid is attributed to Rio Tinto’s iron ore assets the other metals produced are also important. Accordingly, the entire 150 billion cannot be attributed to iron ore and hence the figure is not fully comparable to others in Table 7. In early June 2009 it was announced that Rio Tinto and BHP Billiton had entered into a non-binding joint venture (JV) agreement covering the entirety of both companies iron ore operations and infrastructure in Western Australia. In this way both companies demonstrate that the industrial logic that underlay much of the BHP Billiton bid in 2007 is still very much valid. The new JV would reduce costs both in neighbouring operations and by shorter rail hauls and by offering wider blending opportunities with the products of the two companies, reduce management, procurement and general overhead costs, and finally make future investments more effective. As is the case today, all production will be sold by two separate marketing organisations. In addition, the proposed deal would include a payment of 5.8 billion USD from BHP Billiton to Rio Tinto to make it a 50/50 operation. As a result, the proposed increased Chinese stake in Rio Tinto was not needed anymore and Chinalco, which had bid for a part of Rio Tinto’s shares, withdrew its bid shortly after the announcement of the new joint venture. Through the proposed deal with Rio Tinto the Chinese would have become the largest shareholder in Rio Tinto by far. This possibility is now shut and the power of the Big Three is maintained and even strengthened for the next couple of years. It is not yet clear if the deal will have to be approved by the anti-trust authorities in the countries concerned but for an outside observer at least, it is difficult to see how such close cooperation on producing the iron ore will be possible while at the same time the sales people are completely separated. Important M&A activity has also been noted in other countries, mainly Brazil, in recent years. Although the latest M&A frenzy began in early 2006 it came to a high in mid 2008. The peak was the Oslo based junior London Mining plc selling the Brazilian company Minas Itatiaiucu with an operating iron ore mine in Minas Gerais producing 1-2 Mt/annum and with considerable ore resources of good quality to Arcelor-Mittal in August 2008 for 810 MUSD. London Mining bought the company in 2006 for 89 MUSD. Another deal reported in early 2008 was Usiminas, a Braizilian steel maker, acquiring the independent iron ore miner J. Mendes for 925 MUSD in cash up front and 975 MUSD in future profit related payments. The recent boom started in 2006 when CVRD acquired all the minority shares in Caemi. In an all shares deal CVRD issued new stock to the holders of preferred shares in Caemi to a total value of over 3,500 MUSD. CVRD also took over Rio Verde for 45 MUSD. Later, in early 2007, the Brazilian mining tycoon Eike Batista’s new MMX company clinched two major deals. The first was announced in March when United States based Cleveland-Cliffs completed a deal to buy 30 per cent of MMX’s Amapá project for 133 MUSD. In April a second major deal was completed when Anglo American acquired 49 per cent in MMX Minas-Rio from MMX and the second 30 per cent share holder in MMX, Rio Centennial Asset Participacoes. Anglo American paid 1.15 billion USD which makes the deal one of the largest ever in the iron ore sector. In 2007, interest turned to the smaller deposits and companies active mainly in Minas Gerais. Kazakh Eurasian acquired Bahia Mineracao and Noble Group took over Mhag Mineracao.

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In the United States, Cliffs consolidated its holdings by acquiring the 30 % of United Taconite it did not previously hold for a complex consideration: 100 MUSD in cash, 1.5 million shares and 1.2 million tons of iron ore pellets. Earlier in 2008 Cliffs cancelled its previous intention to sell its 26.8 % interest in the Wabush mines joint venture to the majority owner ArcelorMittal (Dofasco).

Table 7. Iron ore mergers and acquisitions, 1994-2008

Year Buyer Country Seller Country Share %

Target Country Value MUSD

2008 Severstal Russia Mano River Resources

UK 61.5 Putu Range deposit Liberia 37.5

2008 Severstal Russia n/a 6.3 Mano River Resources

UK 4

2008 Portman Ltd Australia n/a 10 Golden West Resources Ltd

Australia 21.4

2008 Eurasian Natural Resources Corp plc

UK n/a 50 Bahia Mineracao Limitada

Brazil 300

2008 Western Mining Co Ltd

China n/a 10 FerrAus Ltd Australia 16

2008 Consolidated Thompson Iron Mines Ltd

Canada n/a 100 Quinto Mining Corp Canada 152

2008 Red Rock Resources plc

UK n/a 3 Jupiter Mines Ltd Australia 1.2

2008 China Metallurgical Construction Group

China Cape Lambert Iron Ore Ltd

Australia 80 Cape Lambert Iron Ore Deposit

Australia 400

2008 Atlas Iron Ltd Australia n/a 19.9 Warwick Resources Limited

Australia 4.3

2008 American Metals & Coal International Inc

USA n/a 9.9 Giralia Resources NL

Australia 22.9

2008 American Metals & Coal International Inc

USA Giralia Resources NL

Australia 16.8 Red Hill Iron Ltd Australia 70

2007 Territory Resources Ltd

Australia n/a 0 Matilda Minerals Ltd Australia 2.8

2007 Aquila Resources Ltd

Australia n/a 6.4 Helix Resources Ltd Australia 2.5

2007 Murchison Metals Ltd

Australia n/a 100 Midwest Corp Ltd Australia 987

2007 Magnitogorsk Iron and Steel Works OJSC

Russia Uralruda Industrial Association

Russia 51 Bakalskoye Iron Ore Mines

Russia 45

2007 Saudi Basic Industries Corporation

Saudi Arabia

Sphere Investments Ltd

Australia 49.9 Guelb el Aouj Iron Ore Deposit

Mauritania 375

2007 Anshan Iron and Steel Co

China n/a 13 Gindalbie Metals Ltd Australia 54.4

2007 Mitsubishi Corp Japan Murchison Metals Ltd

Australia 50 Jack Hill Iron Ore Mine

Australia 125.6

2007 Anshan Iron and Steel Co

China n/a 12.9 Gindalbie Metals Ltd Australia 32.6

2007 Gazprom OJSC Russia Novolipetsk Iron & Steel Works

Russia 12 Lebedinsky Iron Ore Mine

Russia 360

2007 Aricom plc UK Management 50 Kimkanskoye Iron Ore Deposit

Russia 230

2007 Noble Group Ltd Hong Kong

n/a 30 Mhag Mineracao Brazil 60

2007 CVRD Brazil Na 10.1 MBR Brazil 292 2007 Best Decade Ltd China Cape Lambert

Ltd Australia 70 Cape Lambert

project Australia 193

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2007 Cleveland Cliffs USA MMX Brazil 30 Amapá project Brazil 133 2007 Sumitomo Japan n/a 20 Oresteel

Investments RSA 71

2007 Shougang China n/a 13 Australasian Resources

Australia 45

2007 Qatar Steel Company

Qatar Kuwait Petroleum

Kuwait 25 GIIC Bahrain Na

2007 Na Stemcor Holdings

UK 100 Savage River mine Australia Na

2006 CVRD Brazil Public 39.8 CAEMI Brazil 3650 2006 Evrazholding Russia Anglo

American UK 45 Highveld Steel &

Vanadium RSA 678

2006 Kuwait Petroleum Kuwait CVRD Brazil 50 GIIC Bahrain 418 2006 Aricom plc UK n/a 100 Kimkanskoye

deposit Russia 335

2006 Citic China Mineralogy Pty Ltd

Australia 100 Fortesque project Australia 325

2006 Mount Gibson Australia Public 100 Aztec Resources Australia 275 2006 Anshan China Gindalbie

Metals Australia 50 Karara deposit Australia 169

2006 Metalloinvest (Gallagher)

Russia n/a 19.9 Mount Gibson Ltd Australia 74

2006 CVRD Brazil n/a 100 Rio Verde Brazil 45 2006 Eurasia Mining UK n/a 100 Fenimak Kavadarci Macedonia 38 2006 Metalloinvest

(Gallagher) Russia n/a 23 Aztec Resources Australia 23

2006 Tschudi Norway n/a 100 Sydvaranger AS Norway 16 2005 Cleveland-Cliffs USA Public 80 Portman Australia 443 2005 Hancock

Prospecting Australia Kumba RSA 50 Hope Downs project Australia 177

2005 Dofasco Canada CAEMI Brazil 33 QCM Canada 162 2005 Stemcor UK Ivanhoe Mines Canada 100 Savage River Australia 21.5 2004 Admirality

Resources Australia Hanwell

Holdings Hong Kong

100 Hanos de el Tofo dep.

Chile 1.5

2004 Cons. Minerals Australia Reed Resources

Australia 100 Mount Finnerty dep. Australia 1.2

2004 LNM Group UK Zenica Steel RMK

B-H 51 Ljubija Iron Mines B-H Na

2003 Mitsui Japan Bradespar Brazil 15 Valepar Brazil 830 2003 Anglo American UK Public 31 Kumba Resources RSA 465 2003 CVRD Brazil Mitsui Japan 50 CAEMI Brazil 426 2003 Harmony/ARM RSA Anglo

American UK 34.5 Anglovaal Mining RSA 233

2003 Gerdau Brazil Paraibuna Metais

Brazil 100 Iron ore deposits Brazil 30

2003 Cleveland-Cliffs and Laiwu Steel

USA, China

n/a 100 Eveleth Mining USA 3

2003 Cleveland-Cliffs USA LTV Steel USA 25 Empire Iron Partners.

USA 0

2003 Cleveland-Cliffs USA Ispat Inland USA 19 Empire Iron Partners.

USA 0

2002 na State of Brazil Brazil 22 CVRD Brazil 1900 2002 Previ Brazil BHP Billiton Australia 2.4 CVRD Brazil 343 2002 Anglo American UK Public 19.6 Kumba Resources RSA 304 2002 Anglo American UK Stimela Mining 10.5 Kumba Resources RSA 152 2002 Anglo American UK Menell family RSA 34.9 Anglovaal Mining RSA 145 2002 Cleveland-Cliffs USA Algoma Steel USA 45 Tilden Iron Partners. USA 17 2002 Granier family Monaco n/a 26 Mount Gibson Australia 5.9 2002 Mount Gibson Australia Kingstream

Steel Australia 100 Tallering Peak

deposit Australia 2.5

2001 CVRD Brazil ThyssenKrupp Germany 100 Ferteco Mineracao Brazil 696 2001 Mitsui Japan Frering

brothers Brazil 60 Caemi Mineracao Brazil 340

2001 CVRD Brazil Mitsui Japan 50 Caemi Mineracao Brazil 280 2001 Stimela Mining RSA Anglovaal RSA 11 Iscor RSA 90

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2001 Anglovaal Mining RSA IDC RSA 13 Iscor RSA 61 2001 Rio Tinto UK Public 14 Labrador Iron Fund Canada 56 2001 CVRD Brazil Bethlehem

Steel USA 5 MBR Brazil 25

2001 Cleveland-Cliffs USA LTV Steel Mining

USA 100 Iron ore assets USA 13

2001 Ivanhoe Mines Canada Pasminco Ltd Australia 100 Long Plains Mine Australia 1 2000 CVRD Brazil Arbed Luxemb. 63 SAMITRI Brazil 525 2000 Billiton UK Public 2 CVRD Brazil 327 2000 CVRD Brazil n/a 100 Socoimex Brazil 54 2000 Ivanhoe Mines Ltd Canada n/a 100 ABM Mining Australia 29 2000 Portman Ltd Australia Anshan I&S China 40 Koolyanobbing Mine Australia 12 1997 Valepar Brazil State of Brazil Brazil 42 CVRD Brazil 3150 1997 North Broken Hill

Peko Australia Bethlehem

Steel USA 59 Iron Ore Co of

Canada Canada 230

1997 Caemi Brazil Mitsui Japan 15 MBR Brazil 140 1997 Caemi Brazil Mitsui Japan 25 Quebec Cartier Min. Canada 60 1994 Cleveland-Cliffs USA Cyprus

Northshore USA 100 Babbit/Silver Bay

Mine USA 94

Source: Raw Materials Data, 2008. Several tendencies can be observed:

• The trend among steel companies to integrate backwards from steel production into iron ore mining was strengthened:

- Fortescue, which calls itself the "New force in iron ore", completed a deal with Chinese Hunan Valin Iron & Steel Group which will bring the Chinese company's share of Fortescue up to 17.4 per cent. It is interesting to note that a major shareholder of Hunan Valin is Arcelor-Mittal. In all Valin will invest some 1.34 billion AUD in Fortesque.

- Severstal completed its acquisition of the Putu Range project in Liberia after a thorough search of potential targets in India, Latin America and Africa in May 2008.

- Tata Steel group entered into a joint venture with Sodemi, the state owned mining company of Cote d’Ivoire, to jointly develop the Cote d’Ivoire part of the Nimba deposit in December 2007. - The acquisition by Mittal Steel of Arcelor which was pushed through in July 2006 and

formally completed in the end of the year. In this way did Mittal gained not only considerable steel capacity but also control over the iron ore production facilities controlled by Dofasco: QCM and a part of the production from the Wabush mine.

- In late 2006 Mittal continued with a deal in Mexico to merge its existing Lázaro Cárdenas integrated steel plant with neighbouring Mexican long product SICARTSA, which is also integrated backwards into iron ore mines.

- In February 2007 Qatar Steel (Quasco) acquired a 25 per cent interest in Gulf Industrial Investment Company (GIIC) which operates a pellet plant in Bahrain. CVRD had been a 50 per cent owner of GIIC but sold its entire holding in May 2006.

- A month later Quasco together with Saudi Basic Industries Corporation signed a Memorandum of Understanding with SNIM and the Australian junior Sphere Investments to jointly develop the Guelb el Aouj pellet project. This deal was completed in November 2007 when Quasco took 49.9 % in the project for a consideration of 375 MUSD.

- The London registered Vedanta Resources, which has strong Indian roots, took over the controlling 51 per cent interest in Indian iron ore exporter Sesa Goa from Japanese Mitsui for 981 MUSD, one of the largest deals of the year.

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• Most Russian iron ore capacity is captive and controlled by Russian owned steel

works. These companies have become more active internationally and retain the same underlying strategy: to secure a stable flow of iron ore for their expanding operations, both in Russia and elsewhere. These activities are beginning to result in major deals:

- Severstal took a 61.5 % stake in the Putu Range project in Liberia from the TSX and AIM listed junior Mano River and also a 6 % direct holding in Mano River for a total of 56.5 MUSD.

- In July 2006 the Evraz group together with Credit Suisse took control of South African Highveld Steel & Vanadium Corp from Anglo American. The joint venture paid 678 MUSD for slightly less than 50 % with an option to increase to 79 % (all of Anglo’s holding). Highveld is mainly a vanadium producer but it also delivers roughly 2 Mt of iron ore per year. After pressure from the European Commission Evraz reportedly divested the mining business of Highveld in early 2008 to the global steel group Duferco.

- The Evraz group also seized full control over the iron ore mining complex Vysokogorsky GOK in March 2007 through a tender offer for all outstanding shares.

• In Australia the race to create a third strong producer alongside Rio Tinto and BHP

Billiton has been halted, at least for the time being, as Fortescue managed to start its operations on schedule and is now firmly established as the only real competitor to the two majors.

- Murchison Metals proposed a merger with Midwest to stop the Chinese Sinosteel from taking control over the latter’s iron ore projects in early 2008. It may be an indication that the battle over the high quality deposits in Western Australia is intensifying.

- Australian junior Mount Gibson Iron Limited battled to acquire junior colleague Aztec and succeeded at the end of 2006, thereby combining their projects Tallering Peak and Koolan Island. Later in December it was announced that the largest Russian iron ore producer Metalloinvest had taken over 19.9 per cent in Mount Gibson from Cambrian Mining plc, which was its largest shareholder. At the same time it was also announced that the Chinese Shougang group had acquired another 12.2 per cent and hence the two groups together virtually control the new company. In early 2008 the Russian company wished to withdraw from the project and tried to sell directly to Shougang. This attempt was however stopped by regulatory authorities in Australia and the shares were sold to institutional investors.

• Chinese efforts to reduce dependence on foreign sources of iron ore, partly through

developing domestic resources, partly through acquiring ownership and hence better control over foreign operations, have been continuing in 2008 but have not developed as quickly as expected:

- In New Zealand the authorities did not grant permission for Chinese Cheung Kong Infrastructure Holdings to acquire the export part of the Taharoa iron sand operations.

- China Metallurgical Group acquired all of Cape Lambert Iron Ore Ltd namesake project for a total consideration of 400 MAUD in July 2008.

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- It is also interesting to note that the first major investment into Chinese iron ore mining has been made by London Mining which acquired 50 per cent of the operating Maanshan Xiaonanshan mine in the Anhui province for an intial investment of 45 MUSD. The deal also includes the Matang project.

- The Chinese major base metal mining company Western Mining acquired 10 % in FerrAus Ltd in May 2008. In addition to its iron ore deposits in the East Pilbara region FerrAus also has manganese and nickel/gold resources.

- Sinosteel’s battle to take control over Australian junior Midwest through a 1,400

million Australian Dollars offer in 2008 is the latest but perhaps not last development in the fight for the Koolanooka-Blue Hills deposit and the Veld Range iron ore project.

- The Chinese company Best Decade struck a deal with Australian junior Cape

Lambert Iron Ore to acquire 70 per cent of the Cape Lambert project for 250 million Australian Dollars. Best Decade is reportedly the majority owner of steel manufacturer and trader DeLong Holdings, which is listed in Singapore. The deal failed later in 2007.

• The interest of iron ore traders in mining manifested itself in a deal in late 2007 in

which Noble Group acquired 30 % of the junior producer Mhag Mineracao in Brazil. In 2006 the Noble Group of Hong Kong presented a conditional bid for 10 % of Fortescue Metals Group. This bid was however turned down by the Australians. The Noble Group tried in 2005 to get hold of the Hope Downs project that was later partly acquired by Rio Tinto. In early 2007 the group successfully bought into Territory Iron’s Frances Creek project.

• Japanese companies have continued to review their investments in iron ore. On 18

June 2007 it was announced that Mitsubishi had acquired half of the Jack Hill’s project from its Australian proponent Murchison Metals for 150 MUSD in cash and later taking large shares of the investment costs. In 2007 Mitsui sold its holding in Sesa Goa as noted above. The same year Sumitomo took a 20 per cent interest in South African investment company Oresteel, thereby indirectly earning a 6 per cent interest in iron ore miner Assmang.

• In the Canadian Arctic the juniors have been gearing up to intensify exploration but

most activities were put on hold in early 2009. In May 2008 Consolidated Thompson merged with Quinto Mining to acquire its iron ore deposits, which are located next to the former’s Bloom Lake property. Consolidated Thompson also tried to acquire the Wabush mine in 2007 but that proposal was turned down by the owners of the mine. In early 2007 Roche Bay entered into an agreement with another junior, Advanced Explorations Inc, and its chairman John Gingerich, previously with Noranda, for the latter to acquire 50 % of the project by financing most of the exploration and later investment into the proposed mine.

CORPORATE CONTROL Towards the end of 2008 the merger activity in the iron ore sector declined considerably, along with activity in the entire mining sector. Corporate concentration declined for the first

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time in many years. In spite of the M&A activity in earlier years concentration has grown mostly through production increases in existing mines and in green field districts. This means that the major companies have not changed as much as in some other metal mining industries. Tables 8 and 9 show the 15 and 10 leading iron ore companies in 1990 and 2008 respectively and it is easily seen that many of the company names are the same. The degree of consolidation decreased until 2007 mainly because the production by small Chinese and Indian producers grew faster than that of the industry as a whole, thus increasing their share. In 2008 the increased production by new Australian miners, including Fortescue, also played a significant role. Fortescue delivered its first shipments and production reached almost 20 Mt, indicating that the company will reach its set capacity of some 50 Mt in its first full year of operation in 2009. This is the first new major iron ore producer in several decades and it managed to place among the 15 largest controlling companies. The top ten producers controlled only 48.4 per cent of the total world production in 2008, down from a high of 54.4 per cent in 2005. Vale (CVRD) is still at the top and will so remain. Whether it will strengthen its position in the future depends mostly on how long it maintains its production cuts. In early 2009 Vale acquired Rio Tinto's Corumba mine and got control over the expansion potential that Rio Tinto had developed. Rio Tinto has risen to become number two, mainly by acquiring North in the year 2000, after the latter had swallowed IOC a few years earlier. Of the top producers, BHP Billiton has experienced the slowest growth in this decade. Its recent strong increase in production has however almost brought it back to the market share it held in 1990. Mitsui, which used to be the only Japanese company on the list, left its top position in 2007 after having disposed of its holdings in India. Most of the traditionally important domestic European iron ore miners were gone already in 1990. Since then Arbed has closed its European mines and sold the Brazilian ones. LKAB has fallen down the list but has more or less kept its production rate constant over the decade. The North American industry was strongly vertically integrated with complicated joint ventures holding most iron ore operations. With the disintegration of the steel sector, the situation of many of the iron ore mines became untenable. Through a long series of deals, Cliffs Natural Resources (previously Cleveland-Cliffs) has managed to consolidate iron ore production in the United States without. The Ukrainian group System Capital Management is the only one of the companies in former Soviet Union that has managed to get into the top 10 list. Ferrominera Orinoco of Venezuela increased production significantly in 2003/2004 but has since only managed to keep its production volume constant and hence its share of global production is decreasing. After a few years of slow developments Kumba increased production at its Sishen mine by almost 5 Mt in 2008 and moved up the list of top companies.

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Table 8. Corporate control in iron ore mining in 1990 Controlling entity Country Controlled Share of Western production world prod. (Mt) (%) 1 State of Brazil Brazil 85.44 15.4 2 BHP Ltd Australia 46.20e 8.3 3 Rio Tinto plc UK 42.79 7.7 4 State of India India 32.07e 5.8 5 Caemi Mineracao e Metalurgia SA Brazil 23.03e 4.1 6 State of South Africa South Africa 22.23e 4.0 7 State of Venezuela Venezuela 20.12 3.6 8 State of Sweden Sweden 19.74 3.6 9 State of Luxembourg Luxembourg 18.09e 3.3 10 Iron Ore Company of Canada Canada 14.25e 2.6 11 USX Corp USA 13.54e 2.4 12 Mitsui & Co Ltd Japan 13.44e 2.4 13 Dofasco Inc Canada 12.57e 2.3 14 North Ltd Australia 11.31 2.0 15 LTV Corp USA 11.23e 2.0 Total, 15 largest 386.05 69.5 Total, Western world 555.62 100.0 Total, World 977.00 Notes: State of Brazil includes Cia Vale do Rio Doce. State of India includes SAIL, NMDC, Kudremukh and some smaller producers. State of South Africa includes Iscor. State of Venezuela includes CVG Ferrominera Orinoco. State of Sweden includes LKAB. State of Luxembourg includes Arbed. Source: Raw Materials Data, Stockholm 2003.

Table 9. Corporate control in iron ore mining in 2008 Controlling entity Country Controlled Share of Total production world prod. (Mt) (%) 1 Cia Vale do Rio Doce Brazil 303 17.3 2 Rio Tinto plc UK 150 8.6 3 BHP Billiton Ltd Australia 137 7.8 4 State of India India 54 e 3.1 5 Arcelor Mittal UK 46 e 2.6 6 Metalloinvest Russia 38 e 2.2 7 Anglo American South Africa 36.7 2.1 8 Cliffs Natural Resources USA 32.7 1.9 9 System Capital Management Ukraine 24.5 1.4 10 LKAB (State of Sweden) Sweden 23.9 1.4 Total, 10 largest 846 48.4 Total, World 1746 100.0 Notes: State of India includes SAIL and NMDC. Source: Raw Materials Data, Stockholm 2009.

The Arcelor Mittal group (formerly Mittal Steel and before that LNM Group) under Lakshmi Mittal has managed to build an important and quickly growing global network of iron ore mines. The group controls iron ore mines in Kazakhstan, the Ukraine, Bosnia, Algeria, Mexico, Brazil, Canada and the United States. Mittal appears to have chosen a strategy similar to that of the Russian steelworks, trying to secure a stable supply of iron ore through direct ownership. In late 2005 it was announced that the Liberian Nimba iron ore district, where Swedish Lamco was operating from the mid 1960s to the late 1980s, was to be redeveloped by Mittal. In Senegal, Mittal’s plans to invest in the Faleme deposit owned by

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government controlled Miferso, have put the company on a collision course with Kumba, which is also claiming rights to the project. If the quantities of ore that Mittal has contracted in South Africa and the United States are added, Mittal's total captive amount of ore reached some 65 Mt in 2008. There are several capacity additions in the pipeline, including recently announced additions to the Andrade mine in Minas Gerais, Brazil, which is owned by Arcelor Mittal but leased to Vale, amounting to as much as 55 Mt according to Arcelor Mittal sources, and by 2012 the total capacity should be over 110 Mt according to present plans. If all these plans are realized, the self-sufficiency of Arcelor Mittal would reach 75-85 per cent for iron ore in 2014/15. The vertical integration in the global iron ore and steel sector has been declining in the market economies over the last 20 years but a new trend has been noticeable during the last few years. As discussed above, steel companies in Europe and North America have withdrawn from mining and the mining companies have consolidated. With the restructuring of the Russian and Ukrainian industries a new strong tendency towards more direct links between mines and steelworks has emerged. Other new and dynamic steel producers, with their origin mostly in emerging markets, have chosen the same strategy: Mittal Steel and Global Steel Holdings (controlled by Lakshmi Mittal’s younger brother Pramod who chairs the Indian Ispat group), are but two examples. Moreover, with the integration of the Chinese iron and steel sector into the world economy, another group of vertically integrated companies has been introduced. Globally, in mid 2008 20 % of total iron ore production was estimated to be controlled by the steel industry. The figure is slightly lower than in 2007 due to the fast increase in production in Australia and South Africa. It is most probably an underestimate since it includes only the minor part of the Chinese iron ore production that has been possible to identify as controlled by steel companies. In fact, a large part of the medium and small iron ore operations is probably also controlled by local steelworks. Steel companies in the traditional market economies (including developing countries) control 12 %, companies in the CIS countries 5 %, and major Chinese steel companies control some 3 %. The Chinese iron ore sector is much more fragmented than that of any other country. Since there is important vertical integration between steel works and iron ore mines, some consolidation takes place when steel companies merge, but so far the results are modest and only two Chinese companies make it into the top 25 companies in the world. Anshan Iron & Steel Corporation, which is the largest Chinese iron ore mining company, ranks as number 15 in the world in 2008. Its holdings include the well-known Gongchangling mines and six other affiliated mines. Its production in 2008 increased after a temporary decline in 2007 and reached some 17 Mt. The second largest iron ore company in China is Shougang with a controlled production of 13.5 Mt up from 12.7 in 2007 (rank 20 in 2008). Shougang's most important mine is the Marcona operation in Peru. After the price rise in recent years Chinese steelworks are anxious to have more influence over price formation in the iron ore industry, in addition to a stable and secure supply of iron ore and other steel making raw materials. So far, Chinese direct investment in iron ore mines has been limited and Chinese buyers have mostly focused on securing stable supplies through long term contracts. But it is clear that corporate control is a key interest and that major Chinese acquisitions and financing of new mines through equity stakes will take place in the future. The focus is likely to remain on iron ore and copper mining. To measure corporate control at the production stage underestimates the concentration of the iron ore sector since large parts of total production do not enter the market but are produced in

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captive mines or mines which have a protected or restricted market. An alternative way to measure the control is to monitor the share of global seaborne trade of the leading companies. Estimates calculated by RMG are shown in table 10 (the total figure for seaborne trade in the table is lower than that quoted in chapter I, because the figure here has been calculated from export data while the one quoted in chapter I refers to actual shipments; the use of differently structured sources give rise to differences in periodicity, the results of which were probably particularly important in 2008). Measured this way, the shares of the major companies are considerably higher. Vale alone controls 33 % of the total world market for seaborne iron ore and the three largest companies control 69 %. The share of Vale, the largest exporter, has declined in 2008 as has its share of total world production. But as BHP Billiton increased its share of exports, the share controlled by the Big Three was constant at 69 per cent. As it has been difficult to track the flows of ore from the smaller Indian producers it is possible that the exports of Sesa Goa, earlier controlled by Mitsui and from 2007 by Vedanta, should have been included in the list with a production of some 17-18 million tonnes of which most is exported. Its inclusion would however not have changed the conclusions in any significant way. The Herfindahl-Hirschmann Index (HHI) is 1736 at the level of the 10 largest companies (to add smaller producers would not increase the index to any significant degree). This is slightly lower than the 2007 figure and is just below the 1800 limit for what the United States Federal Trade Commission calls “highly concentrated” and it lends support to the argument that major producers have a potential influence over the market and prices. The proposed merger between BHP Billiton and Rio Tinto would have raised this level further and the HHI figure would have increased to almost 2 500. From this point of view it was logical for the proposed merger not to have been approved by regulatory authorities in the European Union unless the companies made some divestitures. It remains to be seen if the anti-trust authorities in any of the countries concerned will have any objections to the proposed production cooperation between Rio Tinto and BHP Billiton. It would not be surprising if some critical comments were made. Table 10. Corporate control in seaborne trade of iron ore Controlling entity Country Controlled share of total seaborne trade (%) 2008 2007 2006 1 Cia Vale do Rio Doce Brazil 32.8 36.1 36.1 2 Rio Tinto UK 18.6 19.3 19.0 3 BHP Billiton UK/Australia 17.1 13.8 14.2 4 Kumba Resources South Africa 3.1 4.0 3.8 5 Fortesque Australia 2.4 na na 6 LKAB Sweden 2.2 2.6 2.7 7 SNIM Mauritania 1.4 1.6 1.6 8 Hierro Peru Peru 0.9 1.0 1.0 9 CAP Chile 0.7 0.9 0.9 10 CVG Ferrominera Venezuela 0.7 0.8 0.8 Others various 20.2 19.9 19.9 Total seaborne trade 805 Mt 100.0 745 Mt 100.0 685 Mt 100.0 Source: Raw Materials Group 2009.

STATE OWNERSHIP The iron ore sector is the last in the global mining industry where state owned entities still play an important role. In India, the state owned group of companies includes those controlled at the national (NMDC and indirectly SAIL) and regional levels (Orissa MDC). In early 2006

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the Indian Government announced that a sale of a 15 per cent stake in NMDC could take place. NMDC is almost wholly owned by government but a small portion of the company is privately held. This first privatisation attempt has however not yet been completed. In Sweden, LKAB has managed to stay competitive while going deeper underground, by complete and remote controlled mechanisation and by moving into higher value pellets production. The Venezuelan and Mauritanian producers also remain under government control. They have gradually lost market shares but have managed to survive as alternative sources of supply. In Iran, the government controls important iron ore production. It has been rumoured that Iran intends to organise an initial public offering for its two steel works Mobarakeh Steel and Esfahan Steel. Nothing has however been said about what will happen to the state controlled iron ore mines. CVRD (now Vale) was privatised amongst considerable national protest, while the privatisation of South African Iscor went more smoothly. With the privatisation in the Ukraine and Russia completed, the overall level of state control has decreased considerably since the early 2000s. In Algeria, the government has announced its intention to sell its remaining ownership in the iron ore operations already jointly owned with Mittal. Most of the large scale Chinese iron ore production is still in central government hands. Anshan Iron & Steel is the largest iron ore producer in China with 17 Mt in 2008. In 1990, more than two thirds of the world's ten largest companies’ production was controlled by the six state owned companies in the group. In 2008, the comparable figure was less than 10 %, and the number of state owned entities in the Top 10 list had decreased to three: SAIL and NMDC in India and LKAB in Sweden. Ferrominera in Venezuela dropped out in 2008. State companies operating in Algeria, China, Egypt, India, Iran, Democratic Republic of Korea Mauritania, Peru, Sweden, Tunisia, Turkey, Venezuela and Vietnam control almost 13 per cent of total world production of iron ore. It is quite possible, given the present increasing concern about security of supply that this figure will start increasing again in the future. Security of supply concerns could very well lead to renewed calls for nationalisation of mineral assets, particularly for iron ore and copper which are of special economic importance.

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V. PROJECT REVIEW

During 2008 new iron ore projects with a total investment amount of some 27 billion USD were presented. Iron ore is now the second most interesting metal for development. In 2007 iron ore surpassed nickel and gold with a total investment of 70 billion USD or 23 % of the total project pipeline. With a total investment of 106 billion USD or 26 % the total project pipeline iron ore is second only to copper with 118 billion USD in 2008. For several years iron ore was under-represented in the project pipeline. When the prices started rising and demand increased the situation was reversed and during the last couple of years iron ore has become more and more important. In 2002, iron ore projects accounted for 4 % of the total amount of investment dollars planned for new mines globally. In 2003 the figure had almost doubled to reach 7 % and that trend continued when in 2004 the share of investment doubled again to 14 %. Since then the growth has flattened, the figure in 2005 was 18 % and 2006 it reached 17 %. For 2007 there was another increase and it reached 23 %. The total amount of project dollars in the pipeline also increased during these years and this development has continued unabated through to 2008. In absolute terms there were 3 billion USD earmarked for iron ore developments in 2002, 14 billion in 2004, 25 billion in 2005, in 2006 34 billion and some 70 billion in 2007. New iron ore mining capacity taken into operation in 2008, as identified at the individual project level, reached around 90 Mt globally. This is a considerably lower figure than in 2007 when some 130 Mt of new capacity was recorded. The year preceding that saw some 70 million tonnes of added capacity and prior to that only 30-40 Mt was reported. These figures include known brown field 8expansion) projects. However the figures for both years exclude many small, locally owned projects, mostly in China and India but also a few in Brazil, which are not announced in the same way as a project run by a listed company. Neither do the figures include incremental capacity increases in existing mines, such as de-bottlenecking or capacity increases due to reorganisation, which are sometimes called "capacity creep”. The “creep” is difficult to monitor and impossible to predict. It can only be inferred at the end of the year when the production increases by more than the sum of all new projects. In contrast to the highly publicized green field projects, many brown field expansion projects pass unnoticed until they come into operation. All of the incremental, half a million or one million ton iron ore projects add up to considerable tonnages, however. The driving forces for refilling the pipeline with new projects have increased considerably in the years of high prices. The coming years will see a lower amount of projects announced but there are still a lot of projects in the pipeline. In 2007 the total potential new iron ore output in the pipeline increased sharply. In 2008 however there was a definite end to the mining boom. The period of strong demand growth has lasted longer than anybody expected in the beginning of the mining boom and the first round of new projects, together with all brown field projects that had been started, was not sufficient to keep up with the growing demand. The big three producers soon realised that if they did not continue to increase production of iron ore they would have to compete on a new iron ore market where there might be a fourth and even a fifth big player. With Fortescue coming on stream the big three could now very well be on their way to become the big four. This development, together with the increases in iron ore prices in 2008, created a determination to go ahead with some of the more long term projects in West Africa and a faster than planned expansion in Brazil and Australia. Projects in the Canadian Arctic have also come a long way since the idea of mining iron ore in the north of Canada was first

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proposed. When the end of the mining boom came, it came rather suddenly, and a lot of the early stage projects will probably be idle for the next couple of years. Only those projects that are actually competitive will go on to become mines. Vale (CVRD) has taken considerable steps to remain the largest producer. Among its projects are expansions in Carajás, first by 10 Mt in 2009 and later an expansion of 30 Mt by 2011. Serra Sul with an addition of 90 Mt to be ready in 2013 is still subject to approval by the board of directors. Apolo is a 24 Mt/a project, also to be finalized in 2013. The combined cost of these projects is roughly 16.6 billion USD. If all Vale’s projects revolving around iron ore, including infrastructure capacity increases and pellet plants, are added together, Vale plans to spend around 20 billion USD. These projects are all part of Vale's plan to compete with local Chinese producers by increasing output and possibly producing pellets directly on the Chinese market. The ore will be transported by new, very large ore carriers with long term shipping contracts to avoid the volatility of freight charges. In China the ore will be distributed by Vale. Vale has also decided to enter the coal business on a massive scale, aiming at 30 Mt production in 2010. The first step was taken in March 2007 when a 662 MUSD acquisition of AMCI Holdings, an Australian coal producer, was completed. In this way Vale will be able, like Rio Tinto and BHP Billiton, to supply both major inputs for steel making. At present there are two coal projects with a combined value of 1.6 billion USD. Rio Tinto completed several iron ore projects during 2007. In 2008 the company stated that it expects a doubling of world demand for its metals and minerals by 2022. Current iron ore projects in Australia includes Hope Downs, Mesa A and Brockman 4 mine developments. On 4 February 2008 BHP Billiton announced approval of 1,094 million USD of capital expenditure to accelerate the growth of its iron ore operations in Western Australia. This investment, the Rapid Growth Project (RGP) 5, is expected to increase capacity to more than 200 Mt during 2011. The actual capacity increase is 50 Mt/a. At present some 50 % of the engineering is complete and construction activities have commenced. BHP Billiton’s long term plan is to increase iron ore capacity to more than 300 Mt, but there are already plans to increase the capacity of Port Hedland, the export port, to over 350 Mt. In the last quarter of 2008 BHP Billiton delivered RGP 3 which expanded the capacity at Area C by 20 Mt. RGP 4 is on track, Engineering is over 95 % complete and construction is nearing 80 % complete. RGP 4 will increase installed capacity by 26 Mt to approximately 155 Mt in the first half of 2010. The plans of the “Big Three” are regularly upgraded but because of bottlenecks, particularly in Western Australia but also in the rest of the world, it is becoming more and more difficult even for these large companies to contain costs and keep time schedules. There has been a lack of trained and experienced staff of all types, from project managers and construction workers to build the new mines and the necessary infrastructure, to geologists and mining engineers. Delivery times for key pieces of equipment have doubled or trebled during the last couple of years. For example, grinding mills, which used to be shipped within a year and a half, could require almost four years from order to delivery. With the falling market and increasing uncertainty in the industry a lot of projects will be postponed, stretched out or slimmed down. This means that not as many trained staff will be needed and the equipment that a year ago was urgent can now wait, maybe until the next iron ore boom. On 15 May 2008 Fortescue (FMG) began loading its first commercial shipment of iron ore at Port Hedland for delivery to Baosteel in China. This means that Australia now has a third

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force in iron ore mining after Rio Tinto and BHP Billiton. Most other Australian projects are at an early stage or considerably smaller. FMGs immediate focus now is cost control, ensuring production at the planned 55 Mt/a level and looking into the expansion program. FMG’s plans for expansion are set on ramping up capacity from today’s 55 Mt/a, to 75 Mt/a, to 95 Mt/a and then 155 Mt/a. This involves expanding the Chichester range and putting the Firetail, Investigator, Solmon East and Serenity resources into production. According to the company, this could be done within a period of about 4-5 years. The trend to de-link iron ore mining from steel production, which was strong during the 1990s and early 2000s, had not even been completed before a reverse trend could be observed. A captive iron ore mine is now seen by some companies as a hedge against continued future price increases. Arcelor Mittal is leading this new development, having over a number of years acquired steel companies with access to iron ore, either through direct ownership such as: Inland Steel in the US with Minorca mine and the former state owned El Hadjar steel complex with the two mines Boukhadra and Ouenza in Algeria and more recently its Mexican and Bosnian acquisitions; or with other long term, contractual arrangements as in the case of former Iscor South Africa, now Mittal South Africa, which has a long term agreement with Kumba to deliver iron ore at a favourable cost plus basis. Other steel works are following Mittal’s example, including Essar Steel in India and several Chinese and Russian steel companies. Chilean steel producer CAP has even taken the consequences of the iron ore boom as far as discussing to make iron ore its core business and putting steel in the back seat. How this trend will develop during times of falling iron ore prices is hard to say but when iron ore becomes easily available the trend might slow down. Indian and Russian companies will however probably follow through with their plans for more self reliance on iron ore. Progress in Canada has been rather slow during the last couple of years, not surprising considering that most new projects are to be found in the Canadian Arctic. During the last year, expansion plans were presented also for Carol iron ore mines. But in 2009 all expansion plans for Carol iron ore mines were postponed because of the current financial situation. In South Africa, Kumba Iron Ore (Kumba) has been trouble ridden during the last couple of years with for example the dispute of the Falémé project in Senegal. These times now seems to be over and the company has set increased production as a goal. By 2016 Kumba has stated that it will have a capacity to produce 150 Mt/a and obtain a 13 % share of the total seaborne market for iron ore. This is more than double today’s capacity and will be achieved by realising the full potential of the Northern Cape Province in South Africa. The company also has access to opportunities in West Africa. The expansion in the Northern Cape is dependent on what is called the Sishen-Saldanha export channel which is the railway connecting the Sishen mine with the Saldanha port. In 2005 Kumba and Transnet concluded a deal to increase the amount of iron ore that Kumba could transport on the railway line. This increase to 35 Mt/a will be reached in 2009. Further increases of the capacity of the railway are underway. In Kumba's project pipeline are several both expansions and new mines planned. The Sishen expansion project is underway with the construction phase almost complete and full operation expected in 2009. The Sishen South project was first envisaged as a 3 Mt/a new mine, but was changed to a 9 Mt/a mine, a feasibility study is completed and an investment decision was taken in July of 2008. The mine will cost 8.5 billion South African Rand, production will commence in 2012 and full capacity will be reached in 2013. Assmang is the other large producer of iron ore in South Africa. As its Beeshoek mine is reaching the end of its economic life, Assmang has taken steps to open the Khumani iron ore

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mine. The construction of the mine is now complete and full production will be reached by 2010. In May 2008 a pre-feasibility study on the expansion of the mine was completed. A feasibility study are underway and is planned to be ready by the second quarter of 2009. Total cost of the project would be 7.3 billion rand it would add 8 Mt/a to today’s 8 Mt/a to make the total capacity of the mine 16 Mt/a. Elsewhere in Africa, there are a few large projects in early stages. Some of these are probably years from completion but may contribute to making Africa more important as an iron ore producing region. Arcelor Mittal has taken an interest in the continent and is in the process of developing three different projects: Falémé in Senegal, El Agareb in Mauritania and Yekepa in Liberia. The Mbalam project is controlled by Sundance resources. In Liberia the Bong Iron Ore Mine is to be reopened by a Chinese company. Rio Tinto with its Simandou project in Guinea is looking into a mine that will potentially produce 70 – 170 Mt per year. In 2007 Rio Tinto approved 145 million USD for a pre-feasibility study focusing on the development of an iron ore mine, a 700 kilometre rail system and a deep water port. A decision on mine development is expected in 2010 and production is anticipated to begin in 2013 with potential for future expansion. However in August 2008 Rio Tinto received correspondence from the Guinean Minister of Mines that informed the company of a compulsory relinquishment of the northern part of the Simandou mining concession whilst confirming Rio Tinto’s right to the southern part. In Bolivia, the Indian steel company Jindal Steel & Power ltd won the tender to develop El Mutun in mid 2006. El Mutun is believed to be one of the world's largest iron ore deposits and Jindal Steel & Power ltd has proposed to spend 2.1 billion USD over the next eight years to develop a 10Mt pellet plant, a 6Mt DRI plant, a 1.7 Mt steel plant and a power plant. But the infrastructural and technical problems at El Mutun are formidable: The deposit straddles the border to Brazil, the distance to the Atlantic Ocean is almost 2,000 kilometres and just to get to the Paraguay River it is necessary to build a railway through the swamps surrounding the Mutun area. Finally, the size of the ore resources has been questioned and the type of ore in the deposit is not easily processed using existing technologies. Mongolia is attracting increasing attention. With iron ore prices rising, Chinese companies have been looking outside their borders for new deposits. In 2004 Tumurtei Iron Ore Co. Ltd, a joint venture between the three Chinese companies Helongjiang, Quinglong and Shougang and a Mongolian company, started construction of an iron ore mine with proven reserves of 230 Mt; design output of the mine is 4 Mt. During the last years a small amount of iron ore has been imported into China from Mongolia and in 2008 this figure rose to 1 Mt. This might suggest that some of the plans of opening mines in Mongolia have in fact taken form and materialized. China has been putting more funds into prospecting for new iron ore deposits during the last couple of years. In 2006 585 million RMB was spent looking for new iron ore resources which resulted in an extra 2.1 billion tons proven iron ore resources. The total number of iron ore projects for 2007 was 1145, of which 786 were new and 290 were put into operation. This actually represents a slight decrease in both the number of projects under construction and new projects. Although the availability of this type of information is uneven, the constant stream of news proclaiming that additional resources has been found in connection to existing mines or in new areas suggests that this trend is continuing and that the Chinese government is spending money mapping out the resource potential of the countryside.

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In 2008 the production of iron ore was 824 Mt (not recalculated to account for the lower iron ore content). For 2009 there have been predictions that the total iron ore demand will fall but that domestic output will increase slightly to reach 860 – 880 Mt. With falling prices and lower freight rates, foreign iron ore producers have an advantage, however, and in early 2009 many Chinese iron ore mines were closed. Information on iron ore projects in China can be sparse and far between. Most projects are not reported at all and new capacity can come on stream without much publicity. That is also the reason why most of these capacity increases are not included in table 11, where only clearly identified projects are shown. To cope with the huge demand for raw materials, some local governments have opened up prospecting and mining rights to domestic and overseas ventures, for example in Xinjiang autonomous region. The total estimated iron ore resources in Xinjiang are presently around 7,782 million tons, while the proven iron ore reserves are 734 Mt. Most likely the eastern part of Tianshan Mountains will be the target area for iron ore prospecting in the future. The estimated reserves there are 2,389 million tons, but according to industry experts these figures are sourced from statistics from 2002. The actual reserves could far exceed the published figure. In early 2009 Baosteel Group announced that it had come to an agreement with the Xinjiang Hetian government to start exploring and mining the province. The solid growth in Chinese iron ore mining continues, in spite of limited resources of quality ore with high grades of iron. A list of projects, most of them with a capacity increase of more than 1-2 million tonnes, which are coordinated or at least known to central authorities, is given below. Only some of them are listed in Table 11 since no further details are known:

• Luzhong iron ore deposit in Anhui province. • Yichang high-phosphorus iron ore project of Shougang Steel • Dadong mine of Dunhua Dadong Mining Co Ltd • Hainan iron ore mine of Hainan Iron and Steel Co Ltd • Danhongshan iron mine of Kunming Steel • Panzhihua-Xichang iron ore deposit of Chongqing Steel • Enshi iron ore project of Wuhan Steel • Xingjiang iron deposit Baosteel Group and Bayi Steel

This list provides circumstantial evidence that the Chinese expansion of capacity is capable of increasing iron ore production at a higher rate than is generally expected. The continuing underestimation of the Chinese pace of expansion has been one of the key problems of our forecast for production capacities during the past years. Given the difficulties in monitoring Chinese new projects, including those that are operated by major companies, not to mention all the small projects, it is our conclusion that most likely there will be flaws in the forecasts of Chinese production yet again in 2009. In today’s lower price environment mines will probably shut down as fast as they opened up during the last couple of years and make the forecast as problematic but reversed. But there is no rational way of handling the issue other than listing the known projects and taking into account the evolution of production in China by month.

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The Chinese so-called “Two Ways Strategy” is firmly in place, with expanded domestic investment into exploration and production capacity constituting one strategy leg and imports and foreign direct investment the other. In 2001 the Chinese government formulated a directive for Chinese companies to seek long-term access to natural resources outside of China. This directive is followed up by various forms of financial aid to companies. During 2007, Chinese direct investment abroad has increased and more Chinese foreign investment is expected in the next couple of years. In addition to the numerous investments in Australian projects, Chinese companies have also started to invest in Africa and South America. The Belinga project in Gabon operated by China National Machinery & Equipment Import & Export Co and the acquisition of the Sierra Grande project in Argentina are just two examples. On 7 January 2009 the Government of China released the National Plans for Mineral Resources 2008 – 2015. The plan states that iron ore, as part of several minerals and metals of which demand is on the rise in the country, is an encouraged sort of ore which, it is suggested, should receive supporting measures to enhance supply capability. The integration of China, Russia, Ukraine and Kazakhstan into the global iron ore market is noticed also in the growing number of projects announced in these areas. But these areas may have high costs and the list of new projects in these countries could be cut more than in other countries. Nevertheless, these countries certainly have the potential and capacity will grow when the financial situation and iron ore markets improve. Projects in the former centrally planned economies are often more long term than in market economy countries and there is a tendency to complete all the investment before production starts even if this delays production start by several years. This way of operating is a legacy from the times of central planning when capital investment was not an issue (or cost) for the operating companies. Russian, Ukrainian and Kazakhstani iron ore producers have expanded capacity in recent years. This was mostly done without any major investments. But in the last couple of years Russian producers have come to the end of this expansion period. In Ukraine the most important projects coming on stream are brown field projects and this suggests that the iron ore mining industry in Ukraine still has some way to go before the need for new deposits arise. It is difficult to obtain clear-cut information about new projects in India. The number of projects – green field and expansions, within the privately held and the state owned sector, and by emerging and existing small producers - is growing fast. More capacity is expected to come on stream than is listed in table 12. Foreign investors, including Rio Tinto, BHP Billiton and Mitsui, and also Chinese and Korean companies, have had exploration projects running in India, often for several years, although little is known about the progress made. Privately owned Indian steel works are also developing projects to secure their growing internal demands. Projections for expansions presented by Indian industry leaders indicate that iron ore production must reach 290 Mt by 2020 to meet domestic steel demand estimated at 180 Mt annually. If exports are to be continued at the current 100 Mt level additional production capacity of 180 Mt on top of the 214 Mt produced in 2008 will become necessary. According to the Ministry of Steel in India, iron ore demand is set to rise to 130 Mt in the fiscal year 2011/2012. This would mean a need of 230 Mt of iron ore if exports stay the same. However, the ministry is anticipating a decrease in the iron ore content so the actual iron ore needed would be more than 230 Mt.

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The potential in India includes:

• Bellary Hospect Region: Capacity of 2007 was 14 Mt/a, which can be increased to 25 Mt/a by consolidating leases and developing new deposits.

• Eastern Region: Capacity in 2007 was 27 Mt/a, and proposed increases should take it to 45 Mt/a by 2008/2009 and 70 Mt/a by 2011/2012.

• Bailadila Region: Capacity 2007 was 17 Mt, which could be increased fairly quickly to 26-27 Mt.

• Goa – Redi Region: Capacity in 2007 was 20 Mt/a, and consolidation in this region could increase the number to 25 Mt/a.

• Karnataka Region: There are some 800 Mt of deposits in the region; if environmental problems can be overcome this could be an important iron ore producing region.

Historically, bottlenecks in the transport systems, both railways and ports, have been major stumbling blocks for increasing Indian iron ore exports. Federal and state governments have however tried to support the growth of the iron ore industry, first, by speeding up license and permitting procedures, and second, by vowing to spend as much as 25 billion dollars on upgrading ports and transport links to the coast. These measures could make it possible for Indian iron ore production and exports to grow much faster. Although reports of progress in India are often less than comprehensive, it is clear that the iron ore expansion moves ahead continuously. The export tax introduced in early 2007 may act as a brake on some of the projects planned in India. In February 2008 the government investigated the possibility to further increase this tax but by March the proposition was put on ice and the tax stayed at a low level. Later, the tax on lump ore was raised to 15 % and stayed at that level until December. In June 2009, the Ministry of Steel proposed that the tax be raised to 15 % again, this time on both lumps and fines. The stated purpose is to protect the domestic steel industry’s access to raw materials. The “Big Three” will face increased competition in the medium to long term, but this competition is not likely to come from complete newcomers to the industry. The magnitude of an investment into iron ore is larger than in any other metal: Gold projects are often smaller than copper projects, and although the average gold project has grown to 165 MUSD compared to 130 million one year ago, they are still much smaller than the +480 MUSD average project size for copper. The average iron ore project is even bigger than a copper project, well above 670 MUSD compared with 500 MUSD in 2007. This makes it difficult for companies without large financial resources to enter the sector. Iron ore projects are often burdened with investments in transport infrastructure, often constituting the major part of the investment cost. The on-going battle fought in and out of courts concerning the rights to use the existing railway systems in Western Australia is but one good example of the importance of the infrastructure. Therefore, in addition to financial strength, considerably bolstered by the previous year’s large price increases, the established major producers have advantages that lower their marginal costs of expansion. First, they are able to expand existing operations, often through relatively minor additional investments in upgrading their transport systems. Second, they can open up new deposits close to existing mines, thus reducing the cost by expanding already existing process plants. With falling prices to be expected those who will

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be hit the hardest are the newcomers, those who started production in the last one to three years when prices was high and rising. In addition, it is more difficult to market an iron ore product than a comparable copper or base metal concentrate, not to mention a gold doré bar. Iron ore is a much more heterogeneous product and there is no metal exchange that can function as a market of last resort. A new producer has to sell directly to a consumer and convince the potential customer that the product will be of consistent quality over a long period of time and that it will be delivered regularly. Accordingly, any completely new producers are likely to meet with major difficulties in entering the market. Instead, more serious competition may come from established second tier producers, particularly in countries where the transport situation is similar to that of the dominating companies. Iron ore and steel companies in China, Russia and India thus have a relatively advantageous situation. These countries are more or less closed to investment by foreign companies even if the situation in India at present is unclear. Exploration projects are underway by for example Rio Tinto. A possible advantage of new and small iron ore producers is the presumed willingness of steel mills to contract part of their iron ore demands to them to counter the growing market power of the “Big Three”. Long term contracts are on the other hand usually a precondition for the ability of the potential new producer to raise capital. The number of projects in the pipeline and the volumes to be produced have increased in spite of several large projects having been completed during 2007. There is a constant flow of new projects announced all over the world by juniors. In table 12 we have grouped the projects into three categories: Certain, Probable and Possible, according to our judgement of the probability that they will get going and start producing iron ore at the planned time. Some projects have been announced so recently that we have not been able to make a thorough assessment or data are simply not available. These projects have no probability indication. For projects without any future capacity figure known to us, we have not been able to gauge their chance of materialising and no probability measure is given. In Brazil the situation has changed for the smaller producers from our last report. CSN has traditionally been forced to give preference to Vale when selling its surplus iron ore. After a court ruling this situation has changed and CSN is now able to export iron ore by itself. It has signed a deal to supply Bahrain based Gulf Industrial Investment Co with iron ore and is looking into expanding the casa de Pedra mine. In a few years CSN might be an iron ore mining company as well as a steel company. The court ruling also gives room for other players to mine in Brazil and to export without having to go through Vale. This might turn into a situation closely resembling the situation in China and India where a large number of smaller producers can easily change their levels of output depending on the demand of the international market. It must also be mentioned that iron ore mines become depleted or are closed down for other reasons. Even if the number of closures has been negligible during the last couple of years the case of KIOCL in India not being given continued environmental approval for its operations in a protected area is a good example of capacity being withdrawn from the market. Another good example is the Beeshoek mine in South Africa. The mine is shortly reaching the end of its economic life but the owner has already started up a new mine to compensate for the capacity loss. In coming years more capacity will disappear.

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The total project pipeline contains more than 430 Mt of new production capacity to come on stream between 2009 and 2011. Of this total, around 172 Mt falls into the category “certain”, 54 Mt “probable” and 204 Mt “possible”. Looking at the geographical distribution of the projects presented in table 12 it is seen that 34 % of the projects are to be found in Oceania, 16 % in South America and 13 % in Europe, while the rest are more or less evenly distributed over the remaining continents. However, 73 % of the projects labelled as certain can be found in Oceania. South America has 6.9 % of the certain projects and Africa accounts for 7.5 % of the certain projects. While West Africa is making a reappearance as a potential iron ore producer the only project labelled certain is in South Africa. Most of the expansion is expected to take place in Australia and South America, mainly in Brazil but also in Mexico and Peru. There are several South American projects in the “probable” and “possible” category. This reflects a certain degree of uncertainty with respect to some new projects. In general only a few of the “probable” projects will become a mine in the period stated by the company handling the project and almost no “possible” projects will make it on time. This does not mean that they will not one day become a mine but only that few such projects will be realised over the coming years. In the period after 2011, more than 300 Mt of additional iron ore capacity is listed with a completion date. Given the present circumstances many of the projects in the pipeline will not be taken forward if the iron ore market does not turn around and continues to expand and that others might not get the financing they need.

Table 11. Completed iron ore projects since May 2008

Name Country World region Status Controlled by Expected

annual ore prod (Mt)

Project cost

M USD Africa

Khumani Iron Ore Mine South Africa Africa Completed ARM, AssOre 8.4 883.8

Asia Tumurtei Iron Ore Mine Mongolia Asia Completed Tumurtei Iron Ore Co. Ltd 4 Americas Amapa Brazil Latin America Completed Anglo American 6.5 273 Sudeste (MMX) Iron Ore Mine Brazil Latin America Completed EBX Group 8.7 Vargem Grande Iron Ore Mines Brazil Latin America Completed Vale na 462 Volcan Iron Ore Deposit Mexico Latin America Completed Arcelor Mittal 2 64 Oceania Whyalla (Middleback Range) Iron Ore Mine Australia Oceania Completed OneSteel 0 321.5 Cloudbreak/ Christmas creek Australia Oceania Completed Fortescue 55 Pardoo Australia Oceania Completed Atlas Iron 3 Source: Raw Materials Data. Mines & Projects, 2009.

Table 12. Ongoing and announced iron ore projects

Name Country Status Controlled by Project

cost MUSD

Project completed

*Expected annual ore prod (Mt)

Completion

Africa Gara Djebilet Iron Ore Deposit Algeria Prefeasibility Loumbou-Loumbou Iron Ore Deposit Benin Conceptual State of Benin

Topa Iron Ore Deposit C African Republ Conceptual Adryx Mbalam Iron Ore Deposit Cameroon Conceptual Sundance Res 3277 2012 35.0 Kribi Iron Ore Deposit Cameroon Conceptual State of Cameroon

Mayoko Iron Ore Deposit Congo (Brazzav) Conceptual DMC Mining 486 Mount Nimba Côte d'Ivoire Conceptual Tata Steel Belinga Iron Ore Deposit Gabon Conceptual Chinese Consortium 3000 30.0 Simandou Iron Ore Deposit Guinea Prefeasibility Rio Tinto plc 6000 2013 70.0

Nimba Iron Ore Deposit Guinea Feasibility EuroNimba (BHP, Newmont) 300

Mount Nimba Iron Ore Mine Liberia Susp, restart/plans State of Liberia 949.1 2008 13.0 po

Bong Iron Ore Mine Liberia Closed, reopen/plans China Union 2600

Putu Range Iron Ore Deposit Liberia Conceptual Severstal, Mano River 30 Wologizi Range Iron Ore Deposit Liberia Conceptual State of Liberia Yekepa Iron Ore Mine Liberia Susp, restart/plans Arcelor Mittal 1500 2009-2012 15.0

Table 12. Ongoing and announced iron ore projects

Name Country Status Controlled by Project

cost MUSD

Project completed

*Expected annual ore prod (Mt)

Completion

Africa Wadi Shatti Iron Ore Deposit Libya Conceptual State of Libya

Soalala Iron Ore Deposit Madagascar Conceptual State of Madagascar Bou Derga Mauritania Prefeasibility SNIM El Agareb Iron Ore Deposit Mauritania Conceptual SNIM, Arcelor Mittal 25 Guelb el Aouj Iron Ore Deposit Mauritania Feasibility SNIM, Sphere Inv 2140 2011 18.0 po Guelb el Rhein Iron Ore Mine Mauritania Operating, exp/plans SNIM 200 Tintekrate Iron Ore Deposit Mauritania Conceptual SNIM

Faleme Iron Ore Deposit Senegal Prefeasibility Arcelor Mittal (contested) 200 2011 25.0 po

Marampa Iron Ore Mines Sierra Leone Closed, reopen/plans

African Minerals, Cape Lambert 25

Tonkolili Iron Ore Deposit Sierra Leone Prefeasibility African Minerals Bur Galan Iron Ore Deposit Somalia Conceptual State of Somalia

Welgevonden (Sishen South) Iron Ore Deposit South Africa Feasibility Anglo American 1029.1 2012 9.0

Khumani Iron Ore Mine phase II South Africa Operating, exp/constr ARM, AssOre 883.8 2012 8.4

Sishen Iron Ore Mine South Africa Operating, exp/constr Anglo American 723.3 2009 13.0 c

Cascades Iron Ore Deposit South Africa Conceptual Mkhombi

Thabazimbi/ Phoenix South Africa Operating, exp/constr Anglo American 2009 pr

Zandrivierspoort Iron Ore Deposit South Africa Prefeasibility Anglo American Liganga Iron Ore Deposit Tanzania Conceptual State of Tanzania Muko Iron Ore Deposit Uganda Conceptual State of Uganda Sukulu Iron Ore Deposit Uganda Conceptual State of Uganda

Table 12. Ongoing and announced iron ore projects

Name Country Status Controlled by Project

cost MUSD

Project completed

*Expected annual ore prod (Mt)

Completion

Asia Haijak Iron Ore Mine Afghanistan Conceptual State of Afghanistan Khaish Iron Ore Deposit Afghanistan Conceptual State of Afghanistan Exi Iron Ore Deposit China Conceptual Wugang 2120 2015 25.0 Meishan Iron Ore Mine China Operating, exp/plans Baosteel 54 2012 Xiaonanshan China Operating exp/plans London Mining 2011 1.0 pr

Gaocun Iron Ore Mine China Operating, exp/constr 21.5 2007

Jinshandian Iron Ore Mine China Operating, exp/feasib Wugang 23 2007

Chonggang Taihe Iron Ore Mine China Operating, exp/plans Daxigou Iron Ore Mine China Operating, exp/plans Shaanxi Longmen 401.6 5.0 Jielong Iron Ore Mine China Construction Chongqing Iron 32.8 Kendekeke Iron Ore Mine China Construction Qinghua Group 84.5 Luliang Iron Deposit China Conceptual Taiyuan Iron 1270 22.0

Luohe Iron Ore Deposit China Construction Maanshan Iron, Longqiao 205.1 7

Shirengou Iron Ore Mine China Operating, exp/plans Hebei Steel 61 Tadong Iron Ore Deposit China Conceptual Tonghua Iron 348.2 5.0 Taohua Iron Deposit China Conceptual Chongqing Iron Xiaoyanzhuang Iron Ore Deposit China Conceptual Sinosteel 2.0 Zhaokou Iron Ore Deposit China Prefeasibility Jinling Mining 0.5 Bara Jamda Iron Ore Deposit India Conceptual Usha Martin 2005 1.0 Bailadila 14 Iron Ore Mine India Operating, exp/plans NMDC 5.5 Chiria Iron Ore Mine India Operating, exp/plans SAIL 664 Kumaraswamy Iron Ore Mine India Feasibility NMDC 60.8 Rowghat Iron Ore Deposit India Prefeasibility SAIL 153 Yogyakarta Ironsands Deposit Indonesia Prefeasibility JMM, Indo Mines 1100 2012 9.0 Nalo Baru Iron Ore Deposit Indonesia Construction Earthstone 40 2009 3.0 c Cipatujah Iron Sands Deposit Indonesia Feasibility Antam Desa Mirah Kalanaman Iron Ore Deposit Indonesia Conceptual Samusa Corp., Lincoln 2 2009 0.3 pr Kalimantan Iron Ore Deposit Indonesia Prefeasibility Krakatau Steel 1000 2010 2.5 po

Table 12. Ongoing and announced iron ore projects

Name Country Status Controlled by Project

cost MUSD

Project completed

*Expected annual ore prod (Mt)

Completion

Asia

Gole Gohar Iron Ore Mine Iran Operating, exp/plans State of Iran 173.9 2009 pr Chogart Iron Ore Mine Iran Operating, exp/plans State of Iran 115 Sarbayskoye Iron Ore Mines I Kazakhstan Operating, exp/plans ENRC plc 900 2009 pr Sarbayskoye Iron Ore Mines II Kazakhstan Operating, exp/plans ENRC plc 580 2011 po Kacharskoye Iron Ore Mine Kazakhstan Operating, exp/plans ENRC plc 37 Musan Iron Ore Mine Korea DPR Operating, exp/plans State of North Korea 867 10.0 Zhetymskoye Iron Ore Deposit Kyrgyzstan Conceptual Xienquang Laos Conceptual 4.5 1.5

Bukit Ibam Iron Ore Mine Malaysia Closed, reopen/plans

Grange Resources, Esperance Min 0.8 2008 0.1 pr

Bayangele Iron Ore Deposit Mongolia Prefeasibility Heilongjiang Fe 35 1.5 Tumugali Iron Ore Deposit Mongolia Conceptual Heilongjiang Fe 56.8

Chiniot Iron Ore Deposit Pakistan Prefeasibility Punjab Mineral Development Corp

Dilband Iron Ore Mine Pakistan Feasibility PPL, State of Pakistan 0.1 Pacific Pearl Iron Ore Deposits Philippines Conceptual Cotton & Western Wadi Sawawin Iron Ore Deposit Saudi Arabia Feasibility State of Saudi Arabia 1800 2012 2.2 Syuren-Ata Iron Ore Mine Uzbekistan Feasibility State of Uzbekistan 40

Quy Xa II Vietnam Feasibility Vietnam Steel/ Kunming I&S 50 2010 1.5 pr

Nguon Chang Iron Ore Mine Vietnam Conceptual 3.8 Thach Khe Iron Ore Deposit Vietnam Prefeasibility 350 5.0

Table 12. Ongoing and announced iron ore projects

Name Country Status Controlled by Project

cost MUSD

Project completed

*Expected annual ore prod (Mt)

Completion

Europe Novoselkovskoye Iron Ore Deposit Belarus Conceptual State of Belarus Okolovskoye Iron Ore Deposit Belarus Conceptual State of Belarus 553.4 4.0

Hannukainen Iron/Copper/Gold Mine Finland Closed, reopen/plans Northland Res 812.1

Mustavaara Mine Finland Closed, reopen/plans Adriana Resources

Rautavaara Finland Prefeasibility Northland Res Sivakkalehto Finland Conceptual Tertiary Minerals plc Isua Iron Ore Deposit Greenland Conceptual London Mining 2009 15.0 pr

Rana Iron Ore Mines Norway Operating, exp/constr L Nilsen & S 27.5 2009 c

Rana Iron Ore Mines Norway Construction L Nilsen & S 2009 1.0 c Sydvaranger Iron Ore Mine Norway Susp, restart/plans Northern Iron 106 2009 7.0 c Goroblagodatsky Iron Ore Mine Russia Susp, restart/plans Evraz Group 11.7 2020 Kovdorsky Iron Ore Mine Russia Operating, exp/plans EuroChem 321.6 2015 Kuranakh Titanium Mine Russia Operating, exp/plans Peter Hambro 168.8 2012 Gubkin Iron Ore Mine Russia Operating, exp/plans Koks OJSC 2010 po Kimkanskoye Iron Ore Deposit Russia Feasibility Peter Hambro 931.5 2010 7.0 po Sideritovaya Iron Ore Mine Russia Operating, exp/plans MMK OJSC, Ural 18.2 2010 po

Korshunovsky Iron Ore Mine Russia Operating, exp/constr Mechel 25 2009 po

Mikhaylovsky Iron Ore Mine Russia Operating, exp/plans Metalloinvest 18.8 2008 pr Tashtagolsky Iron Ore Mine Russia Operating, exp/plans Evraz Group 43 2007 Volkovsky Copper Mine Russia Operating, exp/plans UGMK 0.7 2007 Baikal Iron Ore Deposit Russia Conceptual Bakcharskoye Iron Ore Deposit Russia Conceptual TomGDK 27.4 Berezov Iron Ore Deposit Russia Feasibility Luneng 494 2010 5.5 po

Bolshoi Seym Iron Ore Deposit Russia Conceptual Ural Mining, Peter Hambro

Burlukskoye Iron Ore Mine Russia Construction Evraz Group 3.8 1.3 Chineiskoye Iron Ore Deposit Russia Feasibility BasEl 176.8 1.1 Ermataevskoye Iron Deposit Russia Conceptual Bashkir Mining

Table 12. Ongoing and announced iron ore projects

Name Country Status Controlled by Project

cost MUSD

Project completed

*Expected annual ore prod (Mt)

Completion

Europe Estyuninskaya Iron Ore Mine Russia Operating, exp/plans Evraz Group 170 Garinskoye Iron Ore Mine Russia Feasibility Peter Hambro 500 2010 10.0 po Glubochenskoye Iron Ore Deposit Russia Conceptual Ural Mining Gusevogorskoye Vanadium/Iron Ore Mine Russia Operating, exp/plans Evraz Group Kapaevskoye Iron Deposit Russia Conceptual Khabalykskoye Iron Ore Deposit Russia Conceptual Kopanskoye Iron/Titanium Deposit Russia Conceptual Kostenginskoye Iron Ore Deposit Russia Conceptual Krasnoyarovskoye Iron Ore Deposit Russia Conceptual Mechel 74.6 2012 3.0 Mulginskoye Iron Ore Mine Russia Construction Evraz Group 13.1 1.5 Neryundinskoye Iron Deposit Russia Conceptual Odinochnaya Iron Ore Mine Russia Construction Evraz Group 17.2 2013 0.7 Polivskoye Iron Deposit Russia Conceptual Porozhinskoye Manganese Deposit Russia Conceptual State of Russia 27 Prioskolskoye Iron Ore Deposit Russia Conceptual MMK OJSC, Ural 3656 2013 35.0 Pudozhgorskoye Iron Ore Deposit Russia Conceptual State of Russia 1200 7.0 Severopeschanskoye Iron Ore Mine Russia Operating, exp/plans UGMK, Milkom-Invest 3.2

Sobstvenno-Kachkanarskoye Iron Ore Deposit Russia Conceptual Evraz Group

Sukharinskoye Iron Ore Deposit Russia Prefeasibility Shalymskaya GRE Suroyamskoye Iron Ore Deposit Russia Conceptual Sutarskoye Iron Ore Deposit Russia Conceptual Peter Hambro 200 2010 5.0 po Tabratskoye Iron Ore Depost Russia Conceptual Tashelginskoye Iron Ore Deposit Russia Conceptual Tayatskoye Iron Ore Deposit Russia Conceptual Techenskoye Iron Ore Deposit Russia Prefeasibility MMK OJSC, Ural 40 2.0 Uytashskoye Iron Ore Deposit Russia Conceptual MMK OJSC Vyiskoye Iron Ore Deposit Russia Conceptual State of Russia Yakovlevsky rudnik Iron Ore Deposit Russia Conceptual YakovlevskRudnik 60 1.5 Yunyaginskoye Iron Deposit Russia Conceptual State of Russia

Table 12. Ongoing and announced iron ore projects

Name Country Status Controlled by Project

cost MUSD

Project completed

*Expected annual ore prod (Mt)

Completion

Europe

Tapuli Magnetite Mine Sweden Prefeasibility Northland Res 203.8 2011 3.0 pr

Dannemora Iron Ore Mine Sweden Closed, reopen/feasib Dannemora Min 127 2009 1.5 po

Kiruna Iron Ore Mines Sweden Operating, exp/plans LKAB 1894.9 2012 c Ekströmsberg Iron Ore Deposit Sweden Conceptual Grängesberg Gruvberget Iron Ore Deposit Sweden Conceptual LKAB 2.0

Grängesberg Iron Ore Mine Sweden Closed, reopen/plans Grängesberg

Kallak Iron Ore Deposit Sweden Conceptual Beowulf

Kölen Iron Ore Deposit Sweden Conceptual Archelon, IGE, Kopparberg

Pattok Iron Ore Deposit Sweden Conceptual Archelon, IGE, Kopparberg

Pellivuoma Iron Ore Deposit Sweden Conceptual Northland Res Ruoutevare Iron/Titanium Deposit Sweden Conceptual Beowulf 92.7 3.0 Salmivaara Iron Ore Deposit Sweden Conceptual Northland Res Stora Sahavaara Iron Ore/Copper Deposit Sweden Prefeasibility Northland Res 785.6 3.0 Teltaja Iron ore Deposit Sweden Conceptual Tjårrojåkka Iron Ore Deposit Sweden Conceptual Grängesberg Poltavskaya Iron Ore Mines Ukraine Operating, exp/plans Ferrexpo 500 2012

Gorishni Plavni Iron Ore Mine Ukraine Operating, exp/feasib Ferrexpo 158 2011 po

Belanovskoye Iron Ore Deposit Ukraine Prefeasibility Ferrexpo Brovarkovskoye Iron Ore Deposit Ukraine Prefeasibility Ferrexpo Eristovskoye Iron Ore Mine Ukraine Construction Ferrexpo 116 Galeshchinskoye Iron Ore Deposit Ukraine Feasibility Ferrexpo Kharchenkovskoye Iron Ore Deposit Ukraine Prefeasibility Ferrexpo Krivoy Rog Iron Ore Mines Ukraine Operating, exp/plans Privat Group 500 2009 5.0 pr Kryviy Rih Iron Ore Deposit Ukraine Conceptual State of Ukraine 804 Kuksungur Iron Ore Deposit Ukraine Prefeasibility 340 2009 3.0 po Lavrikovskoye Iron Ore Mine Ukraine Construction Ferrexpo 2008 c Manuylovskoye Iron Ore Deposit Ukraine Prefeasibility Ferrexpo Vasiljevskoye Iron Ore Deposit Ukraine Prefeasibility Ferrexpo

Table 12. Ongoing and announced iron ore projects

Name Country Status Controlled by Project

cost MUSD

Project completed

*Expected annual ore prod (Mt)

Completion

Latin America Sierra Grande Argentina Susp, restart plans LingCheng 105 2011 3.6 po El Mutun Iron Ore Deposit Bolivia Conceptual JSPL 2100 20.0 Apolo Iron Ore Deposit Brazil Feasibility Vale 2509 2013 24.0 Serra Sul Iron Ore Deposit Brazil Conceptual Vale 11297 2013 90.0 Carajas 130 Mt Brazil Feasibility Vale 2478 2011 30.0

Casa de Pedra Iron Ore Mine Brazil Operating, exp/constr CSN 919 2010 10.0 po

Corumba Iron Ore Mine Brazil Operating, exp/plans Vale 2110 2010 10.8 po Carajas 10 Mt Brazil Operating, exp/plans Vale 290 2009 10.0 Corumba (MMX) Iron Ore Mine Brazil Operating, exp/plans EBX Group 86.1 2009 c Itatiaiucu Iron Ore Mine Brazil Operating, exp/plans Arcelor Mittal 2009 1.8 c Jucurutu Iron Ore Mine Brazil Operating, exp/plans Noble Group 1600 2009 po Pico Iron Ore Mines Brazil Operating, exp/plans Vale 282 2008 c Andorinhas Iron Deposit Brazil Prefeasibility Troy Resources Caetite Iron Ore Deposit Brazil Prefeasibility Arcelor Mittal 1600 Esperanca Brazil Conceptual Ferrous Resources 3.0 Liberdade Iron Deposit Brazil Conceptual Centaurus

Minas Rio (MMX) Iron Ore Deposit Brazil Feasibility Anglo American, EBX Group 2300 2009 26.6 po

N5S Iron Ore Deposit Brazil Conceptual Vale Posse Iron Ore Deposit Brazil Conceptual Crusader Res Serra Leste Iron Ore Deposit Brazil Conceptual Vale Vila Nova Iron Ore Deposit Brazil Prefeasibility 39

Table 12. Ongoing and announced iron ore projects

Name Country Status Controlled by Project

cost MUSD

Project completed

*Expected annual ore prod (Mt)

Completion

Latin America La Candelaria Tailing Deposit Chile Construction CAP 174 2008 3.0 pr

Japonesa Iron Ore Mines Chile Operating, exp/plans Wyndham Expl, Admiralty 12 2007 1.5 pr

Bellavista Iron Ore Deposit Chile Prefeasibility JSW Steel, Farkas fam 30 2.5 Boqueron Chanar Iron Ore Deposit Chile Conceptual State of Chile Cerro Negro Norte Iron Ore Deposit Chile Conceptual CAP 340 3.0 El Laco Iron Ore Deposit Chile Prefeasibility CAP El Tofo Iron Ore Deposit Chile Conceptual CAP Javiera Iron Ore Mine Chile Conceptual Soc Minera Varry 8 2008 1.2 po San Gabriel Iron Deposit Chile Conceptual Anaconda Mining Magdalena Iron Sands Deposit Colombia Conceptual Vector resources Ltd Agalteca Iron Deposit Honduras Conceptual Aquila Iron Ore Deposit Mexico Prefeasibility Arcelor Mittal 32.7 1.0 El Artillero Mexico Conceptual London Mining Los Pozos Iron Ore Mine Mexico Construction Cotton & Western Miriam Faraon Iron Ore Deposit Mexico Prefeasibility Arcelor Mittal 60.7 1.5 Pena Colorada Iron Ore Mine Mexico Operating, exp/plans Arcelor Mittal, Techint 70 Marcona Iron Ore Mine Peru Operating, exp/plans Shougang 1000 2011 10.0 c Cuzco Iron Ore Deposit Peru Conceptual Strike Res 2009 po Apurimac Iron Ore Deposit Peru Prefeasibility Strike Res 2300 20.0 Cerro Ccopan Iron Ore Deposit Peru Conceptual Cuervo Res Inc Opaban Iron Ore Deposits Peru Prefeasibility Strike Res Pampa de Pongo Iron Ore Deposit Peru Conceptual Cardero 3280

Table 12. Ongoing and announced iron ore projects

Name Country Status Controlled by Project

cost MUSD

Project completed

*Expected annual ore prod (Mt)

Completion

North America

Carol Iron Ore Mines Canada Operating, exp/plans Rio Tinto plc, Mitsubishi, Labrador Iron Or 468.5 2011 5 po

DSO Iron Deposit Canada Conceptual NML 289 2010 4.0 po Labrador Iron Ore Deposit Canada Conctruction Anglesey Mining 2010 2.0 c Bloom Lake Iron Ore Deposit Canada Construction Cons Thompson 455.4 2009 8.0 c Crest Iron Ore Deposit Canada Feasibility Chevron Res KeMag Iron Ore Deposit Canada Feasibility NML 3800 LabMag Iron Ore Deposit Canada Prefeasibility NML 2750 2011 35.0 po Lac Jeannine Iron Ore Tailings Deposit Canada Conceptual Lac Otelnuk Iron Ore Deposit Canada Conceptual Bedford Resource Mary River Iron Ore Deposit Canada Feasibility Matachewan 3841.5 2011 18.0 po Peppler Lake Iron Ore Deposit Canada Conceptual Quinto 1190.2 22.0 Redford Mineral Deposit Canada Conceptual Logan Resources Roche Bay Canada Conceptual Roche Bay plc Schefferville Iron Ore Deposit Canada Feasibility Anglesey Mining 30 1.5

Wabush Iron Ore Mines Canada Operating, exp/plans US Steel, Arcelor Mittal, Cliffs 120

Comstock Iron Ore Mine USA Susp, restart/plans Palladon Hoyt Lake Iron Ore Project USA Mesabi Mining LLC 165 2010 po

Nashwauk Iron Ore Project USA Feasibility Essar Steel Minnesota LLC 1600 4.1

Northshore (Babbit) Iron Ore Mine USA Operating, exp/plans Cliffs 50

Table 12. Ongoing and announced iron ore projects

Name Country Status Controlled by Project

cost MUSD

Project completed

*Expected annual ore prod (Mt)

Completion

Oceania Hawks Nest Iron Ore Deposit Australia Conceptual Western Plains 2012 6.0

West Pilbara Iron Ore Deposit Australia Prefeasibility AMCI, Aquila Resources, Cullen 84.4 2012 30.0

Rapid Growth Project 5 Australia Operating, exp/feasib BHP Billiton Gr 4800 2011 50.0 c

Brockman No 4 Iron Ore Deposit Australia Conceptual Rio Tinto plc 1521 2010 22.0 c Extension Hill Iron Ore (HM) Deposit Australia Feasibility APAC 48.9 2010 pr

Frances Creek Iron Ore Deposit Australia Operating, exp/feasib Territory Res. 25 2010 3.0 po

Karara/Mungada Iron Ore (Mg) Deposit Australia Feasibility Gindalbie 1424.8 2010 8.0 pr

Koolanooka-Blue Hills Iron Ore (Hematite) Mine Australia Prefeasibility Sinosteel 2010 7.5 po

Mesa A/Warramboo Australia Conceptual

Rio Tinto plc, Mitsui, Nippon Steel, Sumitomo Met Ind 901 2010 25.0 c

Rapid Growth Project 4 Australia Operating, exp/constr BHP Billiton Gr 2150 2010 26.0 c

Abydos Iron Ore Deposit Australia Prefeasibility Atlas Iron 59.3 3.0 Cairn Hill Magnetite-Iron/Copper/Gold Mine Australia Construction IMX Res 2009 1.4 c Iron Magnet II Australia Construction One Steel 252 2009 2.0 c Karara/Mungada Iron Ore (Hm) Deposit Australia Conceptual Gindalbie 90.4 2009 2.0 pr Paulsens East Australia Conceptual Strike Res 2009 1.0 po Peculiar Knob Iron Ore Deposit Australia Feasibility Western Plains 90.8 2009 3.0 po Robertson Range Iron Ore Deposit Australia Conceptual FerrAus 2009 2.0 po Argyle Iron Ore Deposit Australia Prefeasibility Kimberly Metals Group 50

Bakers South Iron Ore Deposit Australia Conceptual Rio Tinto plc, Hancock Prospect

Bald Hill Iron Ore Deposit Australia Conceptual Centrex Balla Balla Iron Ore/Vanadium Deposit Australia Feasibility Aurox 200.4

Balmoral Central Magnetite Deposit/Sino Iron Magnetite Project Australia Conceptual Citic Pacific 2922.5

Table 12. Ongoing and announced iron ore projects

Name Country Status Controlled by Project

cost MUSD

Project completed

*Expected annual ore prod (Mt)

Completion

Oceania Balmoral South Iron Ore Deposit Australia Conceptual Australasian Res 2254.5 Barrambie Vanadium Deposit Australia Feasibility Reed Res 438.8 Beebyn-Weld Range Iron Ore Deposit Australia Conceptual Giralia Blue Hills Iron Ore Deposit Australia Prefeasibility Gindalbie Bungalbin Iron Ore Deposit Australia Conceptual Cliffs Bungalow Iron Ore Deposit Australia Conceptual Centrex Buzzard Iron Ore Deposit Australia Conceptual Western Plains Caliwingina Iron Ore Deposit Australia Conceptual Rio Tinto plc Cape Lambert Iron Ore Deposit Australia Feasibility MCC 501 Caramulla South Iron Ore Deposit Australia Conceptual Warwick Carina Iron Deposit Australia Prefeasibility Polaris Metals Carrow Iron Ore Deposit Australia Conceptual Centrex Christmas creek/ cloudbreak II Australia Prefeasibility Fortescue 2500 45.0 Davidson Creek Iron Ore Deposit Australia Conceptual FerrAus East Angelas Iron Ore Mine Australia Conceptual Hancock Prospect Eyre Peninsula Iron Ore Deposit Australia Conceptual Centrex Fortescue Iron Ore Mine Australia Construction Mineralogy 1171.8 George Palmer Iron Ore Deposit Australia Prefeasibility Australasian Res Giffen Well Iron Ore Deposit Australia Conceptual Felix Resources

Giles Mini Iron Ore Deposit Australia Conceptual Rio Tinto plc, Hancock Prospect

Hamersley Undeveloped Iron Ore Deposits Australia Conceptual Rio Tinto plc Hardey Iron Ore Deposit Australia Conceptual Aquila Resources

Hope Downs Australia Feasibility Rio Tinto plc, Hancock Prospect 364 8.0

Iron Valley Deposit Australia Conceptual Iron Ore Hold 0.8 Irvine Island Iron Ore Deposit Australia Conceptual Cliffs, Pluton Resources Jack Hills Iron Deposit Australia Prefeasibility Sinosteel

Jack Hills Iron Ore Mine Australia Operating, exp/constr Murchison Metals 697.7

Table 12. Ongoing and announced iron ore projects

Name Country Status Controlled by Project

cost MUSD

Project completed

*Expected annual ore prod (Mt)

Completion

Oceania Jimblebar Range Iron Ore Deposit Australia Conceptual Warwick Kestrel Iron Ore Deposit Australia Conceptual Western Plains

Koolanooka-Blue Hills Iron Ore (Magnetite) Mine Australia Prefeasibility Sinosteel 411.6 4.5

Koppio Iron Ore Deposit Australia Conceptual Centrex Lebtheinia Iron Ore Deposit Australia Conceptual Sphere Inv Marillana Iron Ore Deposit Australia Conceptual Brockman Res 508 10.0 Metawandy Iron Ore Deposit Australia Conceptual Rio Tinto plc Mindy Mindy Iron Ore Deposit Australia Feasibility Palmary, Fortescue 22.6 Mount Constance Iron Ore Deposit Australia Conceptual Viento Mount Gibson Iron Ore Deposit Australia Feasibility Shougang 538.4 5.0 Mount Jackson Iron Ore Deposit Australia Conceptual Cliffs Mount Karara Iron Ore Deposit Australia Feasibility Gindalbie 1300 20.0

Mount Lindsay (Renison West) Magnetite/Tin Deposit Australia Conceptual Venture Minerals

Mount Nicholas Iron Ore Deposit Australia Conceptual Fortescue 207.7 Mount Oscar (Fox) Iron Ore Deposit Australia Conceptual Fox Resources Mount Peake Vanadium Deposit Australia Conceptual TNG Mt Caudan Iron Ore Deposit Australia Conceptual Cazaly Resources Nelson Bay Iron Ore Deposit Australia Prefeasibility Gujarat NRE Ltd 15.1 0.1 Nullagine Iron Ore Project Australia Feasibility BC Iron 20.9 5.0 Pardoo (Ridley) Magnetite Deposit Australia Prefeasibility Atlas Iron 1400 10.0 Phil's Creek Iron Ore Australia Conceptual Iron Ore Hold 1.5 Railway Iron Ore Deposit Australia Conceptual United Minerals Rocklea Iron Ore Deposit Australia Conceptual Murchison Metals Roy Hill Iron Ore Deposit Australia Prefeasibility Hancock Prospect Shovelanna Iron Ore Deposit Australia Conceptual Cazaly Resources 5.0

Table 12. Ongoing and announced iron ore projects

Name Country Status Controlled by Project

cost MUSD

Project completed

*Expected annual ore prod (Mt)

Completion

Oceania Solomon Iron Ore Deposit Australia Conceptual Fortescue South Murchison Iron/Gold Mine Australia Conceptual Batavia Mining

Southdown Iron Ore Mine Australia Prefeasibility Grange Resources, Sojitz 640 6.6

Spinifex Ridge Iron Ore Deposit Australia Conceptual Moly Mines Weld Range Iron Ore Deposit Australia Conceptual Sinosteel 655.5 15.0

West Pilbara - Red Hill Iron Ore Deposit Australia Prefeasibility Aquila Resources, Red Hill Iron Lt

Western Creek Iron Ore Deposit Australia Conceptual Giralia Wilcherry Hill Iron Ore Deposit Australia Conceptual Ironclad Mining, Trafford Wilgerup Iron Ore Deposit Australia Prefeasibility Centrex Wiluna West Iron Ore Deposit Australia Prefeasibility Golden West 10.0 Windarling Iron Ore Deposit Australia Conceptual Cliffs Wodgina Iron Ore Deposit Australia Feasibility Atlas Iron 6.6 2.0 Wonmunna Iron Deposit Australia Conceptual Talisman Mg Yalgoo Iron Ore Deposit Australia Conceptual Ferrowest 388.5 2.4

Yalleen Iron Ore Deposit Australia Conceptual Helix Resources, Aquila Resources

Yilgarn Iron Ore Deposit Australia Conceptual Polaris Metals 169.7

1) Explanations: C = Certain; PR = Probable; PO = Possible; na = Investment to maintain production at present level. 2) The exchange rates used are those at the day of announcement of each project and hence vary considerably over the years. Source: Raw Materials Data, Mines & Projects, 2009

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VI. THE OUTLOOK FOR 2009 AND 2010

OUTLOOK FOR THE STEEL MARKET Crude steel production fell precipitously in the final months of 2008 and the rate of production remained at a level clearly below that of 2008 during the first several months of 2009 (see figure 11). Negative growth in steel production is not unheard of. During four earlier recessions since 1970 world steel demand declined, although the falls were generally between 0 and 5 %. Only after the first oil crisis in 1973-1974, when world GDP growth fell to 1 %, was the fall in steel demand greater than 10 %. This recession is as deep and while the effect on steel output in the developed world would be expected to be smaller, given today’s lower steel intensity in these economies, it is offset by the higher steel intensity in China and other rapidly industrializing economies. Figure 11. Monthly world crude steel production, change year on year, per cent

Source: World Steel Association The outlook for the world economy has improved somewhat in recent months. There is hope that the recession is beginning to “bottom out” in developed countries towards the end of 2009, while in developing countries, growth is positive and may be on the way to returning to pre-crisis levels. This is the case particularly in China, where the resurgence is showing signs of affecting steel demand. Apparent steel use in China fell from July to December 2008, when it started rising again. In the first quarter of 2009, growth was fast, making up for lost time and putting China’s steel demand more or less back on the long term trend in April. In the rest of the world, steel mills have introduced massive production cuts and cost-cutting programmes. According to OECD, in May 2009, steel production was running at 43 % of capacity in the United States, 49 % in the EU, and 55 % in Japan. The recession has also led to a very large slowdown in trade. Steel prices continued to fall during the first months of 2009. In May, global average prices were 55 % lower than the peak reached in July 2008 and looked to be trending downwards. Only in China did prices appear to have reached a plateau.. Steel prices are very volatile due

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to frequent regional mismatches between production and demand. If inventory reductions by steel mills and steel using industries continue at the current pace, then any stabilization in demand could trigger at least a temporary rise in prices. The latest World Steel Association’s medium term forecast, presented in April 2009, which anticipates a fall in steel use by almost 15 % in 2009, can be characterized as relatively cautious (see table 13). While there is little reason to be very optimistic about growth prospects in developing countries, steel demand in China was above 2008 levels in the first quarter of 2009 and it is possible that the impact of China’s very large stimulus package will be sufficient to yield positive growth in steel use over the entire year rather than the 5 % fall forecast. Similarly, the composition of macro-economic stimuli in other countries, with an emphasis on construction and support to the transportation industry, is such that the measures are likely to have a positive effect on steel demand. The measures are all just starting to have an effect and it is possible that they will be reinforced by an end to the inventory cutting process. All these factors argue that the upside potential is more important than the downside, relative to the World Steel Association’s forecast. Table 13. Apparent steel use 2008-2010, Mt

Annual growth, % Region

2008 2009 2010 07/08 08/09 09/10

EU(27) 181.5 129.2 -8.4 -28.8 CIS & Other Europe 78.8 59.9 -10.5 -24.0 NAFTA 129.7 88.0 -8.2 -32.2 Central & South America 44.4 38.1 5.9 -14.1 Africa 26.2 26.1 4.3 -0.1 Middle East 43.1 39.8 6.8 -7.5 Asia-Pacific excl.China 268.1 233.1 0.7 -13.1 China 425.7 404.4 2.9 -5.0 World 1197.4 1018.6 1110.0 -1.4 -14.9 9 Source: World Steel Association (figures for 2008 and forecast for 2009). The World Steel Association has not prepared any forecast for 2010. However, there appears to be general agreement that an upturn, albeit maybe modest in developed countries, can be expected that year. China and other emerging economies may be more or less back on track – with the difference being that slower world demand growth will slow down the growth of China’s manufactures exports and oblige China to shift its growth model to one that relies more on the domestic market. In addition, rebuilding of inventories should have a significant positive effect on steel demand. A growth of 9 % in world steel use does not appear reasonable, particularly since this will still only have brought world demand to a level 7 % lower than that reached in 2008.

OUTLOOK FOR THE IRON ORE MARKET At present, in June 2009, the iron ore market shows signs of some tightening. A surge in Chinese imports has led to rising spot prices. Although it is believed that some of the import increase is due to importers expecting prices to rise later, rather than to actual increased demand, it is clear that the upturn in Chinese steel production has also played a role.

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After Rio Tinto and Nippon Steel had reached their agreement on prices it was uncertain if the rest of the industry would follow their lead. The agreement was strongly criticized by Chinese steel producers in particular, who were said to be pushing for a cut of 40 %. Although the Chinese steel mills have not yet agreed to new prices, it would appear reasonable to expect a relatively rapid final settlement to this very long process, considering that the difference between 33 and 40 % is hardly enormous. It is helpful to place the agreement in perspective: Taking into account the changes in exchange rates over the past year, the settlement negotiated by Rio Tinto corresponds to a cut of 20 % in Australian dollar terms compared to the price twelve months ago. For Vale, a 28.8 % cut in the US dollar price, which is the level at which it recently settled, corresponds to a 9.5 % cut in Brazilian Reais compared to the price a year ago. Since many elements of production costs (energy, for example) for both producers are less expensive than a year ago, the cut can not be claimed to be disastrous. Similarly, for Chinese steel companies, the fall in freight rates means that the price of landed iron ore from Australia declines by 42 %, while that of Brazilian ore declines by 60 % compared to June 2008. While steel prices have indeed fallen from their earlier peaks, it is difficult to claim that the iron ore price negotiated by Rio Tinto would by itself undermine the profitability of steel companies, particularly with spot prices in China at just above US$ 70/ton, or very close to the landed price of Rio Tinto ore at the new price. Accordingly, it appears likely that the Rio Tinto-Nippon Steel agreement will be accepted as a benchmark. Prices for Brazilian ore have declined by slightly less, since the reason for the higher price increase for Australian ore in 2008, the large difference in freight rates, has effectively disappeared. The acceptance of the first deal as a benchmark was maybe confirmed on 12 June when BHP Billiton and JFE Steel in Japan agreed on the same price reductions as Rio Tinto and Nippon Steel. As for the benchmark pricing system itself, it is clear that the case for change has been strengthened by events of the past year. It may be too early, however, to conclude that the benchmark pricing system will disappear. In fact, the benchmark system and alternatives may co-exist for a considerable time, although the trend is towards more flexibility, with hedging possibilities providing some of the attraction. It deserves to be noted, however, that a market dominated by spot deals could easily become uncompetitive. Since there is no exchange for iron ore, the highly concentrated supply could, in a less than transparent system based on spot deals, lead to considerable influence for producers. Moreover, since assured off-take is usually a condition for finance being made available, new entrants could find it more difficult to raise finance and develop new sites if a smaller share of the market is covered by long term contracts, thus reinforcing the trend towards higher concentration of supply. Moreover, the need for steel mills to be assured of consistent quality over time also (see chapter I) argues strongly for a continued important role for long term contracts. These contracts will need to have transparent and flexible price provisions, which implies either a recognized reference price or something very much like the benchmark system When analysing probable developments over the medium term, this report has usually utilized a type of gap forecast, comparing projected capacity, based on investment plans, with assumptions about steel production. This approach is less useful in the present situation. The world iron ore industry is operating far below capacity. Even under the most optimistic assumptions about steel production, demand for iron ore will surely be lower in 2009 than in 2008. Moreover, even before the recession, it was clear that the volume of projects in the investment pipeline exceeded expected demand. Last year’s report stated “This would appear to point to an over-supply situation developing in 2009 or, at the latest, in 2010.” It was of

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course noted that it would not take many delays to turn the surplus projected for 2009 into a deficit. However, the financial crisis settled the issue and the reality of excess capacity can not be disputed. For the sake of illustration, figure 12 is instructive. It shows the expected change in iron ore demand over the period 2009-2011, based on table 13, with the further assumption that world crude steel production will increase by 9 per cent in 2011. While the World Steel Association forecast for 2009 may be considered to be conservative, forecasts of 9 % increases in 2010 and 2011 are open to the opposite criticism. The figure also shows the additional capacity that is likely to come into operation over this period based on the list of projects in table 12, divided into “certain” and “probable” projects.

Figure 12. Supply-demand balance 2009-2011 (Mt/y)

It is clear from the figure that the present oversupply situation will not go away soon. There are, however, two important factors that affect the outlook, although they do not eliminate the supply overhang. The two factors are expected low freight rates and high costs in Chinese iron ore mines. Until 2011, the large producers are likely to gradually return production to pre-crisis levels. Given the price reductions agreed this year, the producers carrying the heaviest burden are likely to be those that do not have long term contracts with buyers and that have costs that are too high to realistically compete on the commodity spot market. The largest group of mines fitting this description is that comprised of the small and medium size Chinese producers who will most likely be forced to substantially reduce their output, particularly since they are no longer protected by high freight costs for imported iron ore. Figure 13 illustrates their problem. From early 2007 until the autumn of 2008 they enjoyed very high prices, considerably exceeding the benchmark prices, even taking into account the cost of freight to China. The rapid expansion of world and Chinese steel production meant that marginal deposits with very high operating costs could compete on the Chinese market.

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Eventually, the financial crisis and the ensuing recession put an end to the expansion. Steel prices dropped and freight rates fell precipitously, along with spot prices for iron ore. In late 2008, the combination of lower spot prices and reduced freight rates put overseas producers with contract prices and domestic Chinese miners on an equal footing in terms of the price for landed ore. It is estimated that half the Chinese iron ore mining industry is at present operating at a loss and is being sustained by assistance from governments at different levels. Figure 13. Benchmark and spot prices, US$/ton, 2005-2009

Sources: TEX Report, Metal Bulletin

In the medium term, it is likely that contract prices will stay at a level corresponding to that of current spot prices, that is, US$ 70/ton of landed ore in China. A consequence of this price shift will be a shakeout of Chinese iron ore mining. The effect of the price fall will be reinforced, as far as the Chinese mines are concerned, by rising costs for health and safety measures, environmental management and rising energy prices. It is probable that between one third and half of Chinese iron ore capacity will close over the next three years, with 40 per cent, or 130-150 million tons, being the most likely reduction figure. As domestic production in China falls, the potential slack will be taken up by new investment, particularly by “the big 3”. This will allow the industry in the rest of the world to maintain operating rates that generate a contribution to fixed costs, although they will not produce at full capacity.

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VII. SOME COMMENTS ON THE STATISTICS

Routines and practices for presenting iron ore statistics have evolved over a period of several decades. These practices reflect limitations and constraints imposed by the available source data as well as industry conventions. In some cases, the constraints have become less important and industry conventions have evolved. Accordingly, it may be useful to review possible changes that would increase the value of the statistics to users in industry and government. In the following, some examples of practices that could be changed are discussed. Contrary to the practice used for statistics on other metals, figures for iron ore production and trade are normally presented in gross or natural weight and not as the metal content of the natural ore or concentrates produced. This raises several problems having to do with the comparability of data concerning different mines or countries. First, the natural iron content of ore varies dramatically, with mines in China at one extreme producing ore with an average iron content of less than 30 % while many other countries produce ore with an iron content of above 60 %. Second, the term iron ore may refer to natural ore, concentrates or pellets, which of course have different iron content. Third, reported figures may refer to either wet or dry ore. The difference between the two measures is on the order of five to ten per cent. We have chosen to present figures for wet ore, since this is the most commonly used measure, and we recalculate figures from sources that refer to dry ore. However, it is obvious that this method is not immune to mistakes and that it raises issues of comparability of figures. In some countries, such as Australia, figures are given partly in wet weight, partly in dry weight, complicating the situation further. In other countries, in particular India, where the monsoon rains change the weight of the concentrates shipped considerably over the year, this problem is further exacerbated. Figures on iron ore production normally include only iron ore that is intended for steel production. In the case of most other metals, the total production is reported and a distinction is made later between metallurgical and other uses. At present, we are following the practice of including iron ore produced for non-metallurgical purposes such as pigments, with non-negligible quantities identified in footnotes to the tables. There is one exception to this practice: unless otherwise stated, we do not include the iron content in nickel concentrates from laterite ores, although this is reported as iron ore in some national trade statistics. Another problem is the difficulty of identifying production from ‘captive producers’, in for example Turkey and Mexico. In order to understand the global market for iron ore it is of course important to obtain complete data from these countries. We are gradually improving data concerning these producers and we expect that the situation will improve further in the future. In some of the statistical tables there is a line “Other Latin America” or similar. We are constantly striving to be more specific in the statistics and our goal is to eliminate these lines. We believe that it is in the interest of all stakeholders in the iron ore industry to obtain transparent, timely and consistent iron ore statistics regularly. It is however proving to be increasingly difficult to reach these goals as the availability of consistent statistics of high quality is posing ever greater problems. With the European Union expanding, the distinction between external and internal trade is becoming blurred and statistics are becoming less

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trustworthy. Moreover, during the recent boom period it became clear that commercial considerations act to reduce the availability of data, particularly on prices and other commercially sensitive parameters. With the emerging importance of captive production some producers do not want to give detailed figures, believing it is not necessary when the products do not enter the open market. We should like to emphasize that it is in the interests of all, both suppliers and buyers, to be able to base their considerations and analyses on correct and timely statistics and we urge all users of these statistics to help us by delivering useful, correct and comparable figures. In addition to the printed statistics we also have available more detailed statistics starting earlier than the 10 years that we currently report in the printed version. These tables can be obtained separately in Excel format from the Trust Fund secretariat.

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ABBREVIATIONS

a annum AIM Alternative Investment Markets ARM African Rainbow Mining BEE Black Economic Empowerment BOF basic oxygen furnace c US cent Cia Compania CIS Commonwealth of Independent States CISA China Iron & Steel Association CITIC China International Trust and Investment Corp CMP Cia Minera del Pacífico Concept Conceptual study Conf Confidential Constr Under construction CSN Cia Siderurgica Nacional (Brazil) ctd continued CVRD Compania Vale Rio Doce dmtu dry metric ton unit DRI direct reduced iron DWT deadweight EAF electric arc furnace EU (15) European Union with 15 member countries Feasib Feasibility study FOB Free on board HHI Herfindahl-Hirschman Index IISI International Iron and Steel Institute IOC Iron Ore Company of Canada Isdemir Iskerderun Demir ve Celik A.S. ISG International Steel Group GDP gross domestic product GOK mining and beneficiation plant (Russian acronym) Erdemir Eregli Demir ve Celik Fabrikalari T.A.S. KIOC Kudremukh Iron Ore Company KMA Kursk Magnetic Anomaly Area kt thousand metric tonnes LKAB Loussavaara Kiirunavaara AB ltu long ton dry unit M&A mergers and acquisitions MAUD million Australian dollar MBR Mineracoes Brasileiras Reunidas SA MINR million Indian rupees MCNY million Chinese yuan renminbi MRUB million Russian rouble MSEK million Swedish Krona Mt million metric tonnes MUSD million US dollar MZAR million South African rand na not applicable, not available

94

NAFTA North American Free Trade Association NISCO National Iranian Steel Company NMDC National Mineral Development Company OECD Organisation for Economic Co-operation and Development Prefeas Prefeasibility study q quarter QCM Quebec Cartier Mining RMG Raw Materials Group RSA Republic of South Africa SAIL Steel Authority of India SNIM Societé National Industrielle et Minière SSGPO Sokolov-Sarbay Mining Production Association SSY Simpson Spence & Young t metric tonne Tisco Tata Iron & Steel Co TSX Toronto Stock Exchange UNCTAD United Nations Conference on Trade and Development USD US dollar USSR Union of Soviet Socialist Republics ww Western World y year

95

SOURCES

The present report draws on a host of different sources. The following is not intended to be a full bibliography but simply a listing of the most important sources used:

• First hand, original reports from countries, companies and individuals with whom UNCTAD and the Raw Materials Group have cooperation agreements.

• Journals: Gornyi Zhurnal (in Russian), The Tex Report, Metal Bulletin, Metal Bulletin

Monthly, Mining Journal, Interfax Mining & Metals Report, China Metals Report Weekly (Interfax), China Metallurgical Newsletter, Antaike Iron & Steel Monthly, Skillings Mining Review.

• Special reports by: Drewry Shipping Consultants, SSY Consultancy & Research Ltd.,

Mr Jacques Astier (France), Midrex Technologies, Raw Materials Group, Techno Economic Services (India).

• Statistics: Raw Materials Data, World Steel Association, Midrex World Direct

Reduction Statistics, various national statistical agencies.

• Printed sources: Carlton, D. and J. Perloff, Modern Industrial Organization, HarperCollins College, New York 1994. Who owns who in mining, Raw Materials Group, Roskill Information Services, London 2001. Les minerais de fer et leur préparation, Vol 1 and 2, 2003. Special editions of the journal Les Techniques de l’Industrie Minérale no 16, December 2002 and no 17, January 2003.

Table A8. Iron ore: Prices to Europe (US cents per 1 % Fe per ton) (1)

ChangeExporter Ore type 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 09/08 %

AustraliaHamersley (2) fines 36.50 38.15 35.00 39.40 55.53 - - - - naHamersley (2) lumps 45.56 47.21 42.73 47.79 65.47 - - - - naBHP Billiton (Mount Newman) (2) fines 36.50 38.15 35.00 39.40 55.53 - - - - naBHP Billiton (Mount Newman) (2) lump 45.56 47.21 42.73 47.79 65.47 - - - - naBHP Billiton (Yandi) (2) fines 34.71 36.28 33.29 37.47 52.81 - - - - naRobe River (3) fines 31.55 na na na .. - - - - na

BrazilVale fines (Itabira) 27.67 28.92 28.62 31.04 36.45 62.51 74.39 81.46 134.41 naVale fines (Carajas) 28.79 30.03 29.31 31.95 37.90 65.00 77.35 84.70 140.60 naVale pellets BF Tubarão 49.24 50.10 47.36 52.00 61.88 115.51 112.04 117.96 220.20 naVale pellets DR Tubarão 52.93 53.86 50.91 55.90 66.52 127.06 123.25 129.76 242.22 naVale pellets BF São Luís na na na 52.96 63.60 118.57 115.01 121.08 226.02 naVale pellets DR São Luís na na na 56.93 68.37 130.43 126.52 133.19 - naVale lump (Carajas) 33.94 35.18 34.31 37.36 44.46 79.58 94.70 103.70 - naMBR fines 27.67 28.92 28.62 31.04 36.45 62.51 74.39 81.46 - naMBR lump (BFLO) na na na na na na na 100.46 197.40 naSamarco pellet feed 22.14 23.14 22.90 - - - - - - naSamarco BF grade pellets 48.43 49.25 46.68 51.36 60.86 113.62 111.40 117.28 .. naSamarco DR grade pellets na na na na na na na na 242.22 na

CanadaIOC (Carol Lake) fines 28.60 29.90 29.00 31.80 38.90 66.71 78.25 86.40 145.80 naIOC (Carol Lake) pellets 50.60 51.53 48.30 53.22 64.50 120.06 115.86 122.58 228.82 naQCM (Mount Wright) fines 28.60 29.90 29.00 31.80 38.90 66.71 78.25 86.40 145.80 naQCM (Mount Wright) pellets 50.60 51.53 48.30 53.22 64.50 120.06 115.86 122.58 228.82 na

Chile Huasco (4) pellets 51.94 - - - - - - - - -

1) Calendar years. Unless otherwise specified, prices are on a FOB-DMT (dry metric ton) basis.2) C & F (Rotterdam).3) Until 1997 C&F. .. : Price unknown.4) Before 1998 Algarrobo. - : No sale, no price.

Source: The Tex Report.

Table A8. Iron ore: Prices to Europe (US cents per 1 % Fe per ton) (1) (ctd)

ChangeExporter Ore type 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 09/08 %

MauritaniaSNIM fines (TZF) 29.94 31.40 30.25 33.24 41.35 70.92 82.65 91.00 152.88 naSNIM fines (Guelb) 29.64 31.10 29.95 32.94 41.05 70.62 82.35 90.70 152.58 naSNIM fines (XF) na na na na na na na na 145.24 naSNIM lump 34.15 35.54 33.69 37.08 46.13 79.12 92.21 100.86 198.19 na

naSouth Africa naKumba Resources (Iscor) fines 22.30 23.26 22.70 24.74 29.35 50.34 59.90 65.59 conf. naKumba Resources (Iscor) lump 31.41 32.42 30.80 33.54 39.79 60.24 71.69 78.50 conf. na

naSweden naLKAB fines (MAF) 32.33 33.80 31.93 35.45 44.43 75.84 86.90 96.50 164.0 naLKAB fines (KBF) 31.83 33.30 31.43 34.95 43.93 75.34 86.40 96.00 163.5 naLKAB pellets 53.00 54.08 49.95 55.62 69.25 128.00 122.21 131.0 244.54 na

naVenezuela naCVG (2) fines 36.50 38.15 35.00 39.40 55.53 na na na na na

1) Calendar years. Unless otherwise specified, prices are on a FOB-DMT (dry metric ton) basis.2) C & F (Rotterdam) .. : Price unknown.

- : No sale, no price.Source: The Tex Report.

Table A9. Iron ore: Prices to Japan (US cents per 1 % Fe per ton) (1)

ChangeExporter Ore type 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 09/08 %

Australia (2)Hamersley fines 27.79 28.98 28.28 30.83 35.99 61.72 73.45 80.42 144.66 97.00 -32.9Hamersley lump 36.84 38.03 36.13 39.35 45.93 78.77 93.74 102.64 201.69 112.00 -44.5BHP Billiton (Mount Newman) fines 27.79 28.98 28.28 30.83 35.99 61.72 73.45 80.42 144.66 97.00 -32.9BHP Billiton (Yandi) fines 26.12 27.24 26.58 28.98 33.83 58.02 69.04 80.42 144.66 naBHP Billiton (Mount Newman) lump 36.84 38.03 36.13 39.35 45.93 78.77 93.74 102.64 201.69 112.00 -44.5BHP Billiton (Yandi) lump 33.52 34.60 31.76 34.59 41.03 70.35 na na na naRobe River fines 22.15 23.10 22.55 24.58 29.16 49.20 58.54 64.10 115.30 naRobe River lump 28.64 27.21 29.63 34.60 59.34 70.61 na na na naSavage River (3) pellets 44.50 45.28 - - - - - - - na

BrazilVale (2) fines (Itabira) 24.91 25.98 25.36 27.64 32.27 55.34 65.85 72.11 118.98 85.43 -28.2Vale (2) fines (Carajas) 25.41 26.48 25.86 28.14 32.76 56.18 66.85 73.20 125.17 89.87 -28.2Vale lump (Itabira) 27.45 28.34 26.92 29.32 34.78 61.28 72.91 77.72 179.04 99.42 -44.5Vale (2) lumps (New Tubarão A) 27.45 28.34 26.92 29.32 34.78 72.39 86.14 91.11 .. naMBR fines 25.39 26.48 25.84 28.17 33.42 57.32 68.21 74.69 .. naMBR lump 27.27 28.15 26.74 29.32 34.78 59.65 88.82 97.26 181.78 100.94 -44.5MBR pellet feed 20.92 21.82 21.30 23.91 28.36 54.54 64.90 71.07 .. naNibrasco (2) pellets 47.03 47.85 45.23 49.66 60.02 112.04 108.68 114.42 213.59 110.43 -48.3Samarco pellet feed 20.92 21.82 21.30 23.91 28.36 47.52 56.55 61.92 conf. naSamarco BF grade pellets na na na 49.66 59.10 110.32 107.01 112.66 213.59 naSamarco DR grade pellets na na na na na na na na 242.22 125.23 -48.3

CanadaIOC (Carol Lake) fines 24.16 25.20 24.60 26.81 31.80 54.54 64.90 71.06 .. na

ChileRomeral fines 19.29 20.12 19.64 21.41 29.51 50.61 60.23 .. .. naHuasco (4) pellets 43.82 44.59 42.15 46.28 59.10 110.32 107.11 .. .. na

1) The table refers to the Japanese fiscal years which start 1 April. - : No sale, no price. Unless specified otherwise, prices are on a FOB-DLT (dry long to.. : Price unknown.2) From 2004 prices are on a FOB-DMT (dry metric ton) basis.3) In 2002 and 2003 sales to China only.4) Before 1998 Algarrobo.

Sources: The Tex Report and company reporting.

Table A9. Iron ore: Prices to Japan (US cents per 1% Fe per ton) (1) (ctd)

ChangeExporter Ore type 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 09/08 %

IndiaBailadila fines 26.67 27.82 27.15 29.59 35.10 60.20 71.64 78.45 141.12 naBailadila lump 35.53 36.87 35.03 38.15 45.25 77.60 92.34 101.11 198.68 naDonimalai lump 33.81 34.90 33.16 - - 74.90 89.13 97.71 .. naDonimalai fines 25.34 26.43 25.80 28.12 33.36 60.20 71.64 78.45 .. naMMTC basic grade lump 33.06 34.13 32.42 35.31 41.88 73.44 87.39 95.69 .. naMMTC high grade lump 34.78 35.90 34.11 37.15 44.07 77.12 91.77 100.49 .. naKudremukh (2) concentrates 21.46 22.38 21.84 23.81 28.24 .. .. .. .. naGoa No 9 berth (2) fines 21.42 22.34 21.81 23.78 .. .. .. .. .. na

naNew Zealand naTaharoa iron sand 17.32 18.07 17.63 19.22 22.80 conf. conf. conf. conf. na

naPeru naHierro Peru pellet feed 18.94 19.75 19.28 21.14 25.08 43.01 51.18 56.04 .. na

naSouth Africa (2) naKumba Resources (Iscor) fines 21.13 22.04 21.51 23.45 27.82 - - - - naKumba Resources (Iscor) lump 29.83 30.79 29.25 31.85 37.78 64.79 77.10 84.42 conf. naAssmang fines 20.42 21.30 20.79 22.66 26.88 conf. conf. conf. conf. naAssmang lump 29.47 30.42 28.90 31.47 37.33 conf. conf. conf. conf. na

naVenezuela (2) naCVG pellet feed 19.43 20.27 19.78 21.56 25.57 43.85 52.18 57.14 .. na

1) The table refers to the Japanese fiscal year, which starts 1st of A - : No sale, no price. Unless specified otherwise, prices are on a FOB-DLT (dry long to.. : Price unknown.2) DMT basis.

Source: The Tex Report.