Iron ore market overview 26
Dannemora prospektering 34
Risks and reporting requirements 48
Dannemora shares and ownership 50
three-year overview 52
board of Directors’ Report 54
Income statement 57
balance sheet 58
cash flow statement 59
Additional Information and Notes 60
Audit report 66
Articles of Association 67
board, management and auditor 68
Map over bergslagen 72
Glossary 74
One of sweden’s oldest mines 78
This annual report is a translation of the original annual report in Swedish.
In case of divergence, the Swedish version shall have precedence.
Boltec MC.
Photo: Atlas Copco
Lars-Göran Ohlsson, CEO
Our goal is to resume operations in
the Dannemora mine, establish long
delivery contracts with several leading
steel agencies, and to gradually increase
the ore reserves in the Dannemora field. A
further goal is that we, through exploration,
shall identify new mineral deposits that will
eventually go into production.
busINEss cONcEpt
Dannemora Mineral’s business concept is:
to resume operations at the Dannemora
•
iron ore mine, and to operate and develop this mine with good long-term profitability to explore for base metal and precious me-
•
tal occurrences and to develop these to mi- neable deposits that generate good syner- gies with the operations in the Dannemora mine.
VIsION
Dannemora Mineral’s vision is to maximise value for shareholders by becoming a signifi- cant niche supplier of iron ore to a select gro- up of European steelworks within five years.
The company will supplement its iron ore bu- siness in the long term by mining and refining base and/or precious metal deposits.
ObJEctIVE
Dannemora Mineral’s objective is to resume operations in the Dannemora mine, and to enter long delivery contracts with two to five leading steelworks, and also to gradually increase the ore reserves in the Dannemora field. Another company objective is to explore for new deposits of base and/or precious me- tals that can be brought into production in the long term.
The board has set the following financial ob- jectives for the business:
to achieve a positive operating profit within
•
two years of starting operations
to achieve a level of profitability at least
•
equal to the industry average within three years of starting operations.
The operating objectives can be summarised as follows:
resume operations in the Dannemora mine
•
towards the end of 2009
achieve full production in 2011/2012
•
substantially increase the reserves of iron
•
ore through exploration
locate new deposits of base and/or preci-
•
ous metals by exploration in the region.
stRAtEGY
Dannemora Mineral’s strategy to achieve the set goals consists of the following main ele- ments:
ORGANIsAtION
The company has set up a well-adapted and effective organisation that will develop in step with the growth of the business.
personnel
Experienced and qualified personnel are im- portant for the company’s success. The board and management are therefore working ac- tively to make the company stand out as an attractive and stimulating workplace. In order to ensure the future provision of personnel, the company will conduct an ongoing dia- logue with representatives of the municipal council.
Market
Finding a market for the iron ore products requires supply contracts with specific custo- mers. Dannemora Mineral will strive at an early stage to build long-term relationships with a number of leading European ste- elworks. As a logical consequence of the company’s exploration activities, the market for base and precious metals will be monito- red and continually evaluated.
financing
A resumption of operations at the Danne- mora mine and the continuing exploration busINEss cONcEpt,
VIsION, ObJEctIVE AND stRAtEGY
DANNEMORA MINERAL Ab (publ)
DANNEMORA
MAGNEtIt Ab DANNEMORA
pROspEKtERING Ab
GROup stRuctuRE
Dannemora Mineral AB is the parent com- pany of two subsidiaries, Dannemora Mag- netit AB and Dannemora Prospektering AB.
Dannemora Magnetit’s primary objec- tive is to resume operations at the Dan- nemora iron ore mine, and to operate and develop this with long-term profitability.
Dannemora Prospektering’s task is to find
new occurrences with base and/or precious
metals, and to develop these into mineable
ore deposits.
for new deposits will require injections of ca- pital. Of vital importance for the shareholder value is the structure of the planned financing of the production plants (the proportions of internal and external capital) and the capi- tal cost at which it can be carried out. The company’s financial planning is run as an integral part of the business in Dannemora.
Alternative marketing and technical solutions will be matched against various financial solu- tions in an interactive process. An important part of this process is to assess the risks of va- rious financial solutions.
structure
Dannemora is to be set up as a central plat- form for future mining activity in the eastern part of Bergslagen. The initially comprehen- sive exploration permits will gradually be concentrated on a smaller number of inte- resting prospects. Looking ahead, the plant in Dannemora is expected to become a centre for the mining industry in the eastern part of Bergslagen, from a technical and production perspective, and also in terms of knowledge and administration.
permits
Official permits and other legal regulations are critical components in the business. The company will endeavour to minimise the time and cost risks related to permits and trials.
The business must exemplify open and con- structive collaboration with the authorities concerned.
Environment
Environmental legislation in the exploration and mining industry is extensive and business- critical. The company has therefore organised its business in such a way that it will always conscientiously comply with developments in environmental legislation, and continuously take whatever action is required to comply with current legislation.
In June, Dannemora Magnetit AB submit-
•
ted an application to the Environmental Court at Nacka District Court regarding the resumption of mining operations at the Dannemora mine.
During the year, the Dannemora Group
•
has built up a functioning management or- ganisation for the parent company and for both the subsidiaries.
During the year, the company carried out a
•
new share issue which brought the compa- ny funds of SEK 85.4 million before issue costs. The company’s shares were listed on the First North equity market at the time of the issue.
A moraine sampling programme carried
•
out during the year discovered a number of anomalous gold areas along a belt running northwards from the Dannemora mine.
In the autumn, measurements with magne-
•
tometer and TEM (Time Domain Electro- magnetic) equipment carried by a helicop- ter revealed several interesting anomalies.
TEM measurements in drill holes indicate
•
an electric conductor at a depth of about 100 metres in the southern Dannemora field.
Work on a feasibility study for the re-
•
sumption of operations at the mine continued throughout 2007 but was not publicised until January 2008.
sIGNIfIcANt EVENts 2007
Ore reserves in the Dannemora field -
have been estimated at 28.5 million ton- nes (Mt) with 35.2% iron and 1.8% man- ganese (20.6 Mt of proven ore reserves with 35.1% iron and 1.8% manganese, and 7.9 Mt of probable ore reserves with 35.3% iron and 1.7% manganese).
At full production, it is planed to mine -
2.45 Mt of ore per year, which is estima- ted to yield 1.5 Mt of processed products (50% lump ore and 50% fines). The es- timated ore reserves will allow continual mining for more than 12 years.
Investment costs for the mine and the -
process plant have been estimated at SEK 838 million, spread over four ye- ars.
Operating costs at full production have -
been estimated at approx. SEK 179 per tonne of processed products FOB Hargshamn, which equates to approx.
SEK 109 per tonne of ore.
Based on the investment and operating -
costs reported above, a net present va- lue of SEK 956 million is obtained for the outlays for investment and operating cash flow from the iron ore project, at an discount rate of interest of 8%. In the calculation, an average price of SEK 358 per tonne of iron ore products was used. This is about 20% lower than the price FOB Hargshamn in 2007.
In February
• Dannemora Mineral and Öst-
hammar Municipality agreed on the trans- fer of an area of land of approx. 400 ha from the municipality’s limited company Dannemora Gruvfastigheter to Danne- mora Mineral.
In February, the Brazilian mining conglo-
•
merate Vale negotiated price increases of
65% for iron ore with major Asian steel
manufacturers such as Japan’s Nippon Ste-
el and South Korea’s Posco.
It all started with a clear idea to resume mining at the Dannemora mine, and to become a reputable supplier of iron ore products to steel manufacturers in northern Europe. Now our idea is on the way to become reality.
During the year, we succeeded in carrying out all the key parts of the ambitious pro- gramme we presented when we were listed on First North in April/May 2007. Obviously we received a boost from trends in the iron
ore market and rising prices during 2007 and 2008. But we have also worked hard to find cost-effective and environmentally friendly solutions to the mining and ore processing we are planning. It is very gratifying that the active marketing we did during the year in northern Europe confirmed that there is a significant interest in a new iron ore supplier in the region, and in Dannemora Magnetit’s products in particular.
The work of our other subsidiary, Danne- mora Prospektering, has also been successful.
The exploration carried out during the year re- sulted in a whole series of new prospects of both precious and base metal mineralisations.
NEW sHARE IssuE AROusED GREAt INtEREst
I n order to finance the preparations of the plan- ned mine operations and the exploration, Dan- nemora Mineral launched a new share issue and applied for listing on First North. Interest in the new share issue was considerable, both from institutions and private individuals, being more than seven times oversubscribed. The new share issue brought in about 1,800 new share- holders, and approx. SEK 85.4 million before issue costs.
KEY REcRuItMENts
During the year, we recruited out a number of important people in order to strengthen the or- ganisation of the parent company and its subsi- diaries. The parent company has a new Finance Manager. Dannemora Magnetit has employed a Managing Director, a Site Manager and a Marketing and Logistics Manager. All of them have long and wide-ranging experience in iron ore, mining operations, processing and marke- ting. There has also been recruitment activity at Dannemora Prospektering which has strengthe- ned the organisation and increased our explo- ration skills. A new Exploration Manager was appointed at the end of the year.
AppLIcAtION fOR
ENVIRONMENtAL pERMIts
Dannemora Mineral has had an exploitation concession for the Dannemora field for some time. Before a decision can be made on resu- ming operations, an environmental permit is also required. In June 2007, we submitted an application to the Environmental Court at Nacka District Court to resume mining at Dan- nemora and to process the ore on-site. The application was for the production of 2.0 mil- lion tonnes of lump ore and fines. We are ho- ping that the permit will be granted during the spring of 2008.
MINIMIsING ENVIRONMENtAL IMpAct
During earlier mining in the Dannemora mine, waste products were dumped in a tailing dam above ground. This sort of dumping can in some cases cause unwanted leaching of substan- ces such as heavy metals. To minimize this, we are planning to dump the waste materials from the processing plant in the large open rooms left behind from the previous mining. This proce-
A successful year for
Dannemora Mineral
dure will also stabilize the bedrock and allow us to partly mine some of the old pillars.
fEAsIbILItY stuDY INDIcAtEs GOOD fINANcIAL VIAbILItY
During 2007, a feasibility study was conducted into resuming operations at the Dannemora mine. The results, discussed in more detail in the section Dannemora Magnetit, were very po- sitive and indicate that the planned reopening of the mine is financially viable.
In parallel with the study, we have worked hard to find more cost-effective solutions. This work continues, and we will concentrate in par- ticular on the transport issue. A switch from trucks to rail transport is important for both the environment and the economic outcome of the operation. Ore processing is another important area we will be working on. A larger proportion of lump ore would further improve profitabi- lity.
Another crucial aspect for shareholder value is the structure of future financing of the invest- ments (proportions of internal and external ca- pital) and the capital cost at which they can be made. We are also in the process of examining various possibilities for reducing initial invest- ment costs by using leasing solutions.
puMpING tHE MINE DRY
The Dannemora mine is filled with water up to the 320 metre level. We estimate that approx.
five million cubic metres of water in total will have to be pumped out. The County Adminis- trative Board has granted the company permis- sion to pump out the water using a sedimen- tation basin. Pumping was intended to start during 2007, but as we can start mining the ore bodies that lie in the northern part of the field above water level, the pumping investment pro- bably will not need to be made before the envi- ronmental decision has been obtained.
stRONG suppORt fROM LOcAL pOpuLAtION AND OffIcIAL bODIEs
There is a very strong tradition of mining in Dannemora. When the mine was closed down in 1992, it was a tragedy for the entire district.
That is why we have such strong support, signi- ficant commitment and very positive expecta- tions for the project from both the local popu- lation and officials at the municipal and county levels.
cONtINuING HIGH DEMAND fOR IRON ORE
Over the last seven years, global steel produc- tion has increased dramatically. At the start of the period, iron ore producers had sufficient capacity to meet the increased demand, but since 2006, and particularly during 2007, there has been a shortage of iron ore on the market.
Furthermore, the global need for other raw materials, such as coal, has grown in equal me- asure, resulting in sharp increases in transport costs. Analysts unanimously believe that the shortage will persist for another year or two.
Published prices for fines were raised by about 10% during 2007. Price increases for pellets and lump ore were somewhat lower.
The first results of the price negotiations for 2008 emerged in the middle of February, with news that the Brazilian mining giant Vale had reached an agreement with several large Asian steel manufacturers for a 65% increase in iron ore prices.
The price negotiations for 2008 were mainly influenced by the fact that the demand for iron ore exceeds production capacity, a possible mer- ge between two of the biggest producers and that Australian iron ore mines proposed that the price should be negotiated on a C&F (cost and freight) China basis for comparison. The shar- ply rising spot prices to China have provided the sellers with a powerful negotiating argument.
AGREEMENt WItH östHAMMAR MuNIcIpALItY ON LAND
puRcHAsE
As part of the planned resumption of opera- tions at the Dannemora mine, we have purcha- sed a parcel of land of about 400 hectares from the municipality of Östhammar. This purchase makes us the owners of the area and the esta- blishments needed for mining and processing.
The contract of sale also regulates the re- sponsibility for certain environmental matters.
The municipality will take responsibility for the historical environmental impact, while Dan- nemora Mineral will be responsible for any environmental impact caused by the planne d mining operations.
EXpLORAtION RAIsEs HOpEs
The results from exploration in 2007 have been positive. Several interesting indications of po- tential mineralisations have been located, and
these will be investigated further during 2008.
The moraine sampling carried out revealed several areas with anomalous (raised) contents of base and/or precious metals, which might indicate that there are mineralisations with the- se elements in the bedrock.
Aerial geophysical surveys carried out during the year have also given interesting re- sults. A number of electromagnetic anomalies have been found that have been interpreted as possibly being caused by base metal minerali- sations. Some of these lie within areas where anomalous contents of metals were found in the moraine samples.
We have also got interesting and promising results from the TEM measurements that were carried out in holes previously drilled to locate sulphide mineralisations in the southern part of the Dannemora field.
NEW pREsIDENt AND cEO
On the last day of March 2008 I step down as President and CEO of Dannemora Mineral, on the grounds of age. My successor, Staffan Ben- nerdt, faces a stimulating task. Both the mine project and the exploration have shown positive developments and we are now well equipped to take on the challenges of 2008. I hope that our shareholders share the optimism for the future that I, my successor, and the management all have.
The Dannemora mine has a long history, and it is my firm conviction that it also has a long and successful future ahead. Subject to the decision of the AGM, I will remain on the board and will take an active part in the day- to-day business as an executive board member.
As an “old” mining man, I do not want to miss the chance of being involved in the planned re- sumption of mining at our country’s most histo- ric and tradition-rich iron ore mine.
Lars-Göran Ohlsson
President and CEO, Dannemora Mineral AB
the operations in the iron ore mine are prosecuted by the subsidiary Dannemora Magnetit. compared to other iron ores the Dannemora ore has several advantages. besides iron ores sulphide mineralisations occur in the Dannemora field. some of these have been mined at various periods as a complement to the iron ore production.
DANNEMORA
MAGNEtIt
Photo: Atlas Copco
Dannemora Magnetit, a wholly owned subsidiary of Dannemora Mineral, has as its primary objective the resumption of operations at the Dannemora iron ore mine and thereafter to run and develop this mine with good long-term profitability. the company currently has five permanent employees:
the Managing Director, the site Manager, the Marketing and Logistics Manager, a project co- ordinator and a mine geologist.
The Dannemora field lies in the municipality of Östhammar, about 40 km north of Uppsa- la and 35 km west of Hargshamn, from which the shipment of ore is planned. The nearest urban area is the town of Österbybruk, which has just over 2,000 inhabitants, and lies about 2 km east of the mine. Dannemora is a place infused with the history of many centuries of mining and ore processing.
GEOLOGY
The bedrock of the Dannemora field con- sists mainly of steeply dipping layers of sedi- mentary and volcanic rock (the “leptite for- mation”), considered to be about 1.9 billion years old. Parallel with the Dannemora field, the rock is isoclinal folded into two synclines separated by an intercalated anticline. The Dannemora field is part of the east-southeast
syncline (the “Dannemora Syncline”) that consists of two steeply dipping limbs. The bottom of the syncline is known in the south- ern part of the field. In the northern part it has not been demonstrable, despite diamond drilling to a depth of 1,150 metres. It is there- fore reasonable to suppose that in this part of the field the syncline bottom lies very deep.
The rocks in the Dannemora syncline are supracrustal (formed on the surface). They consist mostly of volcanoclastic rocks (frag- mented rocks of volcanic origin), carbonate rocks, iron mineralisations and metamorpho- sed variants of these. Even though the rock has subsequently undergone substantial alte- ration, the primary structures are unusually well preserved.
The volcanoclastic rocks have been classi- fied as pyroclastic flow deposits or pyroclastic fall deposits, which in simplified terms means that they were formed as a result of violent volcanic activity from gas-rich and fragment- rich ash masses flowing down the volcanoes respectively from material that has rained down from the ash clouds ejected during er- uptions. In the field there are also layers of rock, mostly of the above types, which have been broken down by erosion and re-deposi- ted on the earth’s surface or under the surface of the sea (reworked pyroclastic deposits).
The carbonate rocks in the Dannemora field have been classified as calcitic or dolomi- tic limestone. The calcitic limestone, which is usually white or light grey, contains only small quantities of magnesium, iron and manga-
DANNEMORA
Hargshamn
Uppsala
Norrtälje Österbybruk
TOWARDS GÄVLE
TOWARDS STHLM
The Dannemora mine lies ap- prox. 40 km north of Uppsala and only 35 km from the ship- ment harbour (Hargsham).
The bell tower in Dannemora is being built in 1754 according to the date on the vane.
nese, while the dolomitic limestone is usually dark grey and contains considerable quanti- ties of these elements.
There are two types of skarn in the Dan- nemora field. Adjoining the manganese-poor iron ores, the skarn consists of minerals such as diopside, actinolite and garnet together with varying quantities of magnetite, while the skarn adjoining the manganese-rich ores is dominated by knebelite, dannemorite, ser- pentine, and often also magnetite.
The field is permeated by a large number of magmatic dikes of varying ages. There are also granodioritic intrusive rocks in the south- ern part of the field.
Apart from the isoclinal folding, the bedrock in the Dannemora field is relatively little fol- ded. Instead, the tectonics are characterised by a large number of faults. Some of these are nearly horizontal, and in some cases they have caused substantial displacement.
IRON OREs
The carbonate-bearing and iron-mineralised part of the Dannemora syncline has a length of about 3 km and a width ranging between 400 and 800 metres. Depending on the pri- mary formation of the iron mineralisation and on the later tectonisation, a large number of separated iron orebodies occur throughout the strike of the field and at various depths. In all, some 25 orebodies were mined until the mine was closed down in 1992.
Stratified rock consisting of volcano- clasts and calcitic limestone.
Photo: I. Lager.
Geological overview map of the Dannemora area.
I.Lager, 2001: The geology of the Paleoproterozoic limestone hosted Dannemora iron deposit, Sweden. SGU Rapporter & Meddelanden no 107.
V V
V
V V
V
VV VV V
V V V
VV VV
VV VV
VV VV VV
VV VV
Fault
Syncline
Anticline
0 1 km
V V
V V VV VV
N
Ruddu mine Rambergs mine Klings mine Morströms mine
Vedskata limestone quarry
ÖSTERBYBRUK 17°52´
60°15´
THE DANNEMORA AREA
VV VV VV
VV VV
VV VV
VV VV
V V
V V Bennbo
mines
Persbo mines Ursbo mines
Iron mine (abandoned) Marble quarry (abandoned) Leptite formation (excl. marble)
Granitoids
Marble (carbonate rock)
The Dannemora deposit Dann
emorasjön
Filmsjön
Stordammen Gruvsjön(drained
)
Dannemora main shaft
Near the surface, the orebodies strike in approximately N30oE and dip steeply towards north-west. Deeper down the dip of the orebodies become less steep (70o to 55o).
The thickness of the orebodies varies from a few metres up to approx. 60 metres. Iron mi- neralisations are known from a considerable depth. In the northern part of the field, core drilling has intersected iron mineralisation down to a depth of about 1,000 metres.
The entirely dominant and only econo- mically interesting iron mineral in the field is magnetite, a mineral consisting of iron and oxygen (Fe3O4). The magnetite is mostly fine grained (0.04-0.1 millimetres). The orebodies generally appear as more or less stratiform layers in the carbonate rocks. They are ho-
Longitudinal section through the Dannemora field showing mined out ore and remaining ore to the depth investigated by core drilling.
Head frame and the old pro- cess plant in Dannemora.
LENGtH sEctION tHROuGH tHE DANNEMORA fIELD
Konstäng1-4
Diamanten1
Botenhäll Lyndon
Mellanfält
Myrmalm
Norrnäs
Sjöhag Svea
100 200 300 400 500 600 700 800
4900 4800 4700 4600 4500 4400 4300 4200 4100 4000 3900 3800 3700 3600 3500 3400 3300 3200 3100 3000 2900 2800 2700 2600 2500 2400 2300 2200
Silvbergsmalm 1&2
Main crusher
Skip station
Southern ventilation shaft Northern ventilation shaft LENGTH SECTION (m)
Drifts & shafts
Mined out ore
Remaining ore
N S
Head frame
Strömsmalm
Kruthus Schaktmalm
Diamanten 2
DEPTH (m)
wever often surrounded by various types of skarn minerals, which are also included in the ore itself.
In one of the orebodies, up to about 3 per cent manganese occurs in the magnetite.
Manganese is also included in some of the skarn minerals such as knebelite and danne- morite, which appear together with the mag- netite, and result in several of the orebodies having a relatively high total manganese con- tent, of which some are silicate-bound.
Historically, the mined iron ores in the Dannemora field have been classified into th- ree main types:
Manganese-rich skarn iron ores
• consisting
mainly of magnetite, knebelite, dannemo- rite and serpentine. The iron content in these mineralisations varies in the range 30-50per cent, and the manganese content is 1-6 per cent.
Manganese-poor skarn iron ores
• consisting
mainly of magnetite, diopside and acti- nolite. The iron content amounts to 30-50 per cent, and the manganese content is as a rule 0.2-1 per cent.
Calcareous iron ores
• consisting of magnetite, calcite, dolomite, and sometimes iron-bea- ring carbonate minerals.
All the ore bodies in the field have low phosphor contents (0.001-0.007 per cent).
The sulphur content varies, but may in some ore bodies amount to a few tenths of a per- centage point.
suLpHIDE MINERALIsAtIONs A number of small sulphide occurrences are known in the Dannemora field. Some of these have high zinc content, and have been mined at various periods. As the mine pro- duction in previous periods of operation was entirely geared towards iron ore, the sulphide mineralisations have not been investigated to any noteworthy extent.
The sulphide mineralisations can be clas- sified into two main types, based on their mi- neralogical composition:
Mineralisations with sphalerite, galena,
•
pyrite and arsenopyrite (contains up to 20 grams of silver per tonne).
Mineralisations with chalcopyrite, pyrite,
•
pyrrhotite and arsenopyrite (contains in some places up to 4 grams of gold per tonne).
Svavelgruvan, which lies in the southern part of the Dannemora field, was mentioned as far back as 1656 when it was said to have been known for a long time already. After having been closed down for many years, in 1820 a drift was made to the mineralisation. There does not seem to have been any actual pro- duction until more than half a century later, in 1896, when it was reported that mining had started in the zinc-rich sections. During 1880-1918, more than 27,000 tonnes of zinc ore was mined from this deposit. At the sur- face the mineralisation was 42 metres long and 12 meters wide, but it narrowed and disappeared almost entirely at a depth of 55 metres.
Sphalerite-rich ore from the Dannemora field.
Photo: L-G Ohlsson.
Iron ore Zinc ore Pyrite ore Volcanic rocks
Carbonate rocks Diorite
Geological map of Svavelgruvan at a depth of 40 m.
I. Lager, SGU Rapporter & Med- delanden no 107.
0 50m
N
During the most recent period of opera- tion, several new zinc mineralisations were localised next to the Silverberg deposit. Some of these were partially mined between the le- vels of 260 metres and 300 metres, but the sizes of the deposits are not known, as they were only explored with a small number of drill holes before the mine was closed down in 1992.
During the most recent period of ope- ration, a chalcopyrite mineralisation was discovered north-east of Sjöhagsmalmen at a depth of 460 metres. This was estimated to have an area of 1,500 m2 and a copper content of 0.44 per cent. Occasional samples taken of the mineralisation showed up to 4 grams of gold per tonne.
MINERAL REsOuRcEs
The estimates of the mineral resources in the Dannemora mine were carried out by Hans- Eric Lundgren (ARRC Geoconsulting AB), who has been approved as a Qualified Person (“QP”) by SveMin (Swedish Association of Mines, Mineral and Metal Producers) and by FAERI (Finnish Association of Extractive Re- sources Industry). The estimates were prepa- red in accordance with the recommendations issued by Svemin and FAERI. These general- ly adhere to the Canadian policy document NI 43-101.
With a cut-off of 30 per cent iron, the measured mineral resources total 19.4 million tonnes with 41.5 per cent iron and 1.9 per
cent manganese, and the indicated mineral resources total 6.2 million tonnes with 39.2 per cent iron and 2.2 per cent manganese (together they make 25.5 million tonnes with 41.0 per cent iron and 2.0 per cent mangane- se). Added to this are 0.4 million tonnes with 39.6 per cent iron and 1.5 per cent manga- nese, classified as inferred mineral resources.
There are some sections within the model- led volumes that contain less than 30 per cent iron and which are therefore not included in the estimates reported above. From a mining technology perspective, these sections cannot be left behind, and therefore they have been included in the mineral resources.
Including the tonnage in these poorer sections, the measured mineral resources are
Svavelgruvan in the southern part of the Dannemora field.
Photo: L-G Ohlsson.
MINERAL REsOuRcEs IN tHE DANNEMORA fIELD As Of sEp 2007
The estimates include sections with <30 per cent iron which, because of the mining method, cannot be excluded.
The grades are calculated from older analyses which have partly been corroborated against new analyses made by the Geolaboratory of the Geological Survey of Finland (now Labtium Oy), accredited under FINAS TO25 (EN ISO/
IEC 17025).
*Based on calculations in old reports.
Measured Mineral resources
iindicated Mineral resources
inferred Mineral resources
Mineralisation Kton % Fe % M n Kton % Fe % M n Kton % Fe % M n
lyndon 1 2 836,8 40,77 0,86 46,6 31,59 0,51 0,5 32,34 0,51
lyndon 3 416,4 20,34 2,95 886,3 21,90 2,67 249,5 18,94 2,18
Konstäng 1 -4 1 262,4 43,11 1,16 143,6 39,41 1,13 11,6 41,91 1,25
Konstäng 2 -3 2 952,6 37,34 3,72 128,9 36,59 3,47 4,3 42,96 3,40
Kruthus 4 084,6 41,03 0,65 65,5 40,67 1,16 0 - -
svea 3 112,5 39,84 2,63 116,6 31,58 1,52 0,1 35,89 2,11
diamanten 2 3 268,2 39,91 3,10 845,8 40,36 3,06 377,7 40,59 3,16
sjöhag 424,1 39,83 0,39 197,0 44,06 0,35 89,6 43,16 0,31
schaktmalmen 1 445,0 37,94 0,70 471,2 30,94 0,74 251,1 23,97 0,63
ströms 1 535,2 33,51 1,81 126,3 36,46 1,81 3,6 35,65 2,09
ströms 2 201,6 31,34 1,32 87,8 30,23 1,26 8,0 27,98 1,21
Botenhäll 1 261,9 30,39 1,55 245,5 30,35 1,77 3,2 31,64 1,98
normäs 1 737,3 35,26 1,97 1 540,0 36,32 2,06 160,8 38,68 2,09
normäs 2 1 043,0 34,04 1,94 661,7 35,79 2,09 102,0 34,69 2,04
Pillars etc.* 0 - - 2 400,0 39,00 2,40 0 - -
total 23 581,6 38,45 1,90 7 962,7 35,53 2,18 1 261,8 32,37 2,00
The grades are estimated from older analyses which have been partially corroborated.
The corroborating analyses were made by the Geolabora- tory of the Geological Survey of Finland (now Labtium Oy), accredited under FINAS TO25 (EN ISO/IEC 17025).
*Based on calculations in old reports.
estimated at 23.6 million tonnes with 38.5 per cent iron and 1.9 per cent manganese, the in- dicated mineral resources at 8.0 million ton- nes with 35.5 per cent iron and 2.2 per cent manganese, and the inferred mineral resour- ces at 1.3 million tonnes with 32.4 per cent iron and 2.0 per cent manganese.
The measured and indicated mineral re- sources taken together total 31.5 million ton- nes with 37.7 per cent iron and 2.0 per cent manganese.
ORE REsERVEs
The estimates of ore reserves in the Danne- mora mine were made by Vattenfall Power Consultant AB. The mineral resources repor- ted above formed the basis for these estimates.
To each mineralisation, an estimated waste rock dilution was added and an estimated ore loss was subtracted.
Mining in the Dannemora mine is plan- ned to continue as before the mine was closed down, using a method best described as a mo- dified form of sub-level caving. Normal sub- level caving assumes that the country rock eventually collapses and follows the mining downwards. However, previous mining in the Dannemora mine shows that no significant caving has occurred.
It is therefore estimated that the narrower ores can generally be loaded clean and that the waste rock dilution in these will consist mostly of waste rock that results from over- drilling which not can be avoid.
Proven ore resources ProBaBle ore resources total ore resources
Mineralisation Kton % Fe % M n Kton % Fe % M n Kton % Fe % M n
lyndon 1 2 834 37,23 0,77 47 28,95 0,46 2 881 37,09 0,77
lyndon 3 0 - - 0 - - 0 - -
Konstäng 1 -4 1 111 39,65 1,05 126 36,28 1,03 1 237 39,30 1,05
Konstäng 2 -3 2 602 34,94 3,44 114 34,25 3,21 2 716 34,92 3,44
Kruthus 1 896 38,67 0,61 56 38,34 1,08 1 952 38,66 0,62
Kruthus <500m 0 - - 1 401 38,67 0,61 1 401 38,67 0,61
svea 2 750 37,26 2,44 103 29,61 1,41 2 853 36,98 2,40
diamanten 2 3 236 36,74 2,82 837 37,15 2,78 4 073 36,82 2,81
sjöhag 526 33,09 0,31 244 36,50 0,28 770 34,17 0,30
schaktmalmen 1 512 33,40 0,60 493 27,36 0,64 2 005 31,91 0,61
ströms 1 642 28,76 1,51 152 31,22 1,51 794 29,23 1,51
ströms 2 234 27,71 1,14 102 26,75 1,09 336 27,42 1,12
Botenhäll 1 464 26,89 1,34 285 26,85 1,53 1 749 26,88 1,37
normäs 1 718 33,28 1.84 1 499 34,27 1,93 2 217 33,95 1,90
normäs 2 1 089 30,03 1,67 691 31,54 1,80 1 780 30,62 1,72
Pillars etc.* 0 - - 1 699 39,00 2,40 1 699 39,00 2,40
total 20 612 35,12 1,78 7 849 35,32 1,69 28 461 35,18 1,76
The stable buildings in Dannemora.
ORE REsERVEs IN tHE DANNEMORA fIELD As Of DEc 2007
The wider ores are assumed in time to have a waste rock dilution more closely ap- proximating the normal for sub-level caving.
In the estimate of the ore reserves, the waste rock dilution is assumed to consist of a one- metre disc around the orebody. The waste rock mixture from mining the remaining pil- lars is deemed negligible. In total the waste rock dilution has been estimated at approx.
3.0 Mt (approx. 10 per cent of the mineral resources or just under 11 per cent of the mi- neral resources minus ore losses).
The ore wall rocks consist of metavolca- nics, limestone, skarn and granite. The li- mestone is often iron-rich, and then has an estimated iron content of 22 per cent, while the skarn is estimated to have an iron content of 18.6 per cent. In other types of wall rocks, the iron content has been assumed to be 0 per cent. The average iron content in the waste rock dilution is estimated at 5 per cent, based on the distribution of rocks around a number of ore bodies.
The ore losses are related to the mining method, irregularities in the ore bodies and the offsetting of pillars. The expected ore los- ses have been calculated for each ore body.
They amount in total to about 4.8 Mt with 36.9 per cent iron and 1.8 per cent mangane- se, which corresponds to approx. 15 per cent of the mineral resources or just under 14 per cent of the mineral resources plus the waste rock dilution.
CHARGING
CRUSHER POCKET
BELT CONVEyOR
MEASURING POCKET SKIP STATION NEW SLICE LEVEL
DRILLING
SLICE LEVELS Simplified sketch showing
the principles of sub-level caving at the Dannemora mine.
LOADING
The proven ore reserves in the Dannemo- ra field (December 2007) have been estimated at 20.6 Mt with 35.1 per cent iron and 1.8 per cent manganese, while the probable ore reser- ves have been estimated at 7.9 Mt with 35.3 per cent iron and 1.7 per cent manganese (a total of 28.5 Mt with 35.2 per cent iron and 1.8 per cent manganese).
The total reserves include some ore in previously offset pillar, and ore which, due to its proximity to the shaft, probably cannot be mined until near the end of the mine’s life.
MINING
As before the mine was shut down in 1992 the mining method that will be used at the planed restart of operations can be categori- sed as sub-level caving.
The ores will be developed and mined with sub-level drifts, but in most cases the wall rock will not cave in (see figure on page 18). From the working faces, the ore will be transported directly by truck or by rock passes to one of the emptying stations at the 350 or 460 meter levels. Via a bin, the ore will then reach the primary crusher at the 520 metre level and after storage in another bin it will be transported by skips to the surface.
The maximum quantity of ore that can be mined in two shifts is judged to be about 2.66 Mt per year.
pRODuctION
Production from the processing plant during the first and second years of operation
The head frame at the Danne- mora mine.
The ore that is hoisted up from the mine at full production will have a size of less than 220 mm. It will either be tipped into a bin in order to be fed later into the processing plant, or be stored temporarily in heaps on the mine yard. In the processing plant, the ore is first passed through a magnetic separator.
The magnetic material goes into a sieve which separates it into two fractions (less than 18 mm and more than 18 mm), while the non-magnetic part is crushed to less than 50 mm. The coarse magnetic fraction goes to a cone crusher in which it is crushed to less than 50 mm, after which it is mixed with the fraction of less than 18 mm. This material is again sieved into two fractions (less than 16 mm and between 16 mm and 50 mm). The fraction between 16 mm and 50 mm is crushed to less than 20 mm and goes back into the sieve. The fine fraction less than 16 mm passes over yet another sieve, where it is split into fractions of less than 4 mm and between 4 mm and 16 mm. The coarser fraction goes over two magnetic separators. The magnetic material from these constitutes the final lump ore.
The non-magnetic part is crushed and sieved. The fine fraction of less than 4 mm passes over two separators. The magnetic part constitutes the final fines product. The fine part from the earlier sieving (less than 4 mm) is further treated in two separators. The magnetic material from these also goes into the final fines product.
pLANED pROcEssING is planned to be 0.5 Mt and 1.0 Mt respec-
tively of lump ore and fines. At full produc- tion (third year of operation), the processing plant is expected to deliver 1.5 Mt of finished products, consisting of 50 per cent lump ore (4-16 mm) with 50 per cent iron, and 50 per cent fines (<4 mm) with 55 per cent iron. Pro- cess trials also indicate that it may be possible to achieve up to 60% lump ore, which should improve the result.
Full production requires a run of mine (ROM) tonnage (delivered to the plant) of approx. 2.45 Mt per year with 35.2 per cent iron. On these assumptions, the estimated ore reserves (28.5 Mt) will allow continuous mining for over 12 years. However, it is con- sidered highly probable that the planned ex- ploration in the mine (SEK 5.0 million per year) will result in additional ore reserves and thereby lengthen the life of the mine.
ORE pROcEssING pLANt
Studies have indicated that even if the invest- ment turns out to be somewhat greater, it will clearly be economically beneficial to build a completely new processing plant rather than using the old one, as the operating costs in a new building will be significantly lower.
It was intended in the original plans that the ore from the mine would be processed in a conventional two-stage process comprising magnetic separation and screening (for pro- duction of lump ore) followed by wet grinding in two mills, magnetic separation and dewate- ring (for production of fines).
Rocket Boomer drilling mach- ine.
Photo: Atlas Copco.
ROM -220 mm 326 t/h 35,2 % Fe
-220 mm 52.1 t/h 5,0 % Fe 2.89 t/m3 1,73 t/m3
-50 mm -220 mm 273,3 t/h 40,9 % Fe
-18 mm 88 t/h 40.9 % Fe 3.77 t/m3 2.26 t/m3
+18 mm 185,7 t/h 40.9 % Fe 3.77 t/m3 2.26 t/m3
-50 mm -20 mm +16-50 mm
+16-50 mm -16 mm 273,3 t/h 40,9 % Fe -50 mm 52.1 t/h 5,0 % Fe
-16 mm 272,7 t/h 40,9 % Fe Avf -50 mm 52.1 t/h 5,0 % Fe
-16 mm 272,7 t/h 40,9 % Fe Avf -50 mm 52.1 t/h 5,0 % Fe
4-16 mm 151,8 t/h 40.9 % Fe
Avf 4-16 mm 45,6 t/h 19 % Fe 3.2 t/m3 1.9 t/m3 -4 mm
121,9 t/h 40.9 % Fe
-4 mm
-4 mm +4 mm
Avf -50 mm 52.1 t/h 5,0 % Fe
Avf -4 mm 76.9 t/h 14 % Fe
Konc -4 mm 90.6 t/h 55 % Fe
Konc 4-16 mm 106,2 t/h 50% Fe ROM -220 mm
326 t/h 35,2 % Fe
-220 mm 52.1 t/h 5,0 % Fe 2.89 t/m3 1,73 t/m3
-50 mm -220 mm 273,3 t/h 40,9 % Fe
-18 mm 88 t/h 40.9 % Fe 3.77 t/m3 2.26 t/m3
+18 mm 185,7 t/h 40.9 % Fe 3.77 t/m3 2.26 t/m3
-50 mm -20 mm +16-50 mm
+16-50 mm -16 mm 273,3 t/h 40,9 % Fe -50 mm 52.1 t/h 5,0 % Fe
-16 mm 272,7 t/h 40,9 % Fe Avf -50 mm 52.1 t/h 5,0 % Fe
-16 mm 272,7 t/h 40,9 % Fe Avf -50 mm 52.1 t/h 5,0 % Fe
4-16 mm 151,8 t/h 40.9 % Fe
Avf 4-16 mm 45,6 t/h 19 % Fe 3.2 t/m3 1.9 t/m3 -4 mm
121,9 t/h 40.9 % Fe
-4 mm
-4 mm +4 mm
Avf -50 mm 52.1 t/h 5,0 % Fe
Avf -4 mm 76.9 t/h 14 % Fe
Konc -4 mm 90.6 t/h 55 % Fe
Konc 4-16 mm 106,2 t/h 50% Fe
The conditions required for the entire iron ore processing to be carried out dry, which would significantly reduce both investments and operating costs, have been investigated.
Process trials carried out so far indicate that this is achievable.
The trials also indicate that it may be pos- sible to increase the proportion of lump ore to 60 per cent. This would increase income, as the price of lump ore is higher than the price of fines. If further trials verify that this is possible, a number of minor investments will have to be made in the processing plant.
INVEstMENts
The total initial investment expenditure during the first four years is estimated at SEK 838 million. Investment costs in the mine and the industrial area are estimated at just over SEK 650 million (Vattenfall Power Consultant AB), while investments in the processing plant are estimated at SEK 147 million (PROing H&J AB). Added to this are investments of about SEK 40 million for pumping out the mine and some work in the shaft (Dannemora Mineral). Some of the assumptions made for the estimate:
the mine will produce 2.45 Mt of ore
• (ROM)
the plant will be able to process 3.3 Mt of
•
ore, and produce a maximum of 2.0 Mt of lump ore and fines
operations will be managed by the company
•
in both the mine and the processing plant
Simplified sketch showing the head frame, the old and the planned new processing plant.
The mine office at the Dan- nemora Mine.
Photo: L-G Ohlsson.
brand new machinery in the mine and the
•
processing plant
new hoist in the existing shaft.
•
Certain parts of the mining operations can be subcontracted. This would reduce investment costs but increase operating costs. Various al- ternatives to reduce investment costs through leasing/service agreements with suppliers are being discussed, but these have not been as- sumed in the estimates.
Initial investments are estimated to be made over the first four years (SEK 132 milli- on in year 0, SEK 390 million in year 1, SEK 226 million in year 2 and SEK 90 million in year 3). The most substantial investments during the first year (year 0) include the ore processing plants, the extension of the exis- ting ramp, and the pumping of the mine.
The financial calculations assume that re- investments of SEK 32 million will need to be made in year 7 into machinery.
OpERAtING cOsts
Operating costs at full production are esti- mated at SEK 178.50 per tonne of processed products FOB Hargshamn or SEK 109.30 per tonne of ore (ROM). The operating costs consist mainly of:
mining costs
•
processing costs
•
transport costs to the harbour
•
environmental, restoration and exploration
• costs.
The planned new main ramps and mining ramps constitute a considerable part of the invest- ment cost during year 0 to 3.
SEK 000s
Mobile machinery above and under ground 97 060
ramps, drifts, raises and rock mechanics 96 446
industrial area above ground 17 937
Mine water and industrial water 42 494
crushing and emptying station below ground 52 801
shaft hoisting, rock hoist 94 042
Mine ventilation 85 508
Workshops below ground 5 832
electrical power and distribution 31 339
spare parts 1% 5 235
ePcM 7% 36 642
contingencies 15% 84 800
Total for mine and industrial area 650 136
Machine equipment etc. 54 500
construction works 43 500
electrical installations (electrical power & control) 23 700 ventilation, heating for the process plant building 1 220
ePcM 15 000
contingencies 9 080
Total processing plant 147 000
Pumping and shaft works 40 000
total 837 136
INVEstMENt EXpENDItuRE DuRING YEARs 0 tO 3
Mining truck.
Photo: Atlas Copco.
The mining costs estimated by Vattenfall Power Consultant AB are SEK 107.70 per tonne of processed product (SEK 65.90 per tonne of ore). Ore processing costs have been estimated by PROing H&J AB at SEK 11.50 per tonne of processed product, equivalent to SEK 7.00 per tonne of ore.
Transport costs, harbour costs and hand- ling costs have been estimated at SEK 51.50 per tonne of finished product or SEK 31.50 per tonne of ore. The feasibility study assu- med that all transport during the lifetime of the mine will be by truck without exception (60 tonnes/vehicle) at a cost of SEK 37.90 per tonne for processed products (equates to SEK 23.20 per tonne of ore).
Dannemora Mineral believes that the rail- way line between the mine and Hargshamn should be ready for use in the first year of full production (2011/2012), which would consi- derably reduce transport costs. Transport by rail is estimated to cost around SEK 14.00 per tonne of processed products (equates to about SEK 8.60 per tonne of ore), but will require some additional investment.
Restoration costs (environmental costs) have been estimated at SEK 2.0 million per year and exploration costs in the mine at SEK 5.0 million per year. In the estimate, these costs have been charged to operating costs for a total of SEK 4.70 per tonne of processed products or SEK 2.90 per tonne of ore.
The lower production during the first two years of operation, combined with transport of the ore to the surface by ramp and the fact that significant parts of the operations in the mine are planned to be undertaken by contractors, means that operating costs in these years will be considerably higher than at full production and with transport to the surface via the shaft. In the feasibility study, the operating costs for the first year of opera- tion are estimated at SEK 162.30 per tonne of ore (equates to SEK 265.00 per tonne of finished products), and for the second year at SEK 161.80 per tonne of ore (SEK 264.30 per tonne of finished products).
Workshops, head frame and the old process plant at the Dannemora mine.
Photo: L-G Ohlsson.
OpERAtING AND INVEstMENt cOsts, REVENuE
Operating and investment costs plus revenue from year 0 to year 13 (inclusive).
Estimated operating costs at full production (2.45 Mt ore/
year), under own management and with shaft hoisting.
cost Operating costs
SEK/tonne of ore Operating costs SEK/tonne of lump ore and fines
development in waste rock 5.58 9.11
development in ore 11.55 18.87
Mining sub-level caving 37.12 60.62
ventilation 7.04 11.50
Water (mine) 0.94 1.54
crushing 0.77 1.26
Hoisting skip 2.91 4.75
Sub-total mining 65.91 107.65
Processing 7.01 11.45
Sub-total mining and enrichment 72.92 119.10
transport 23.20 37.90
Harbour 7.35 12.00
Handling 0.98 1.60
Sub-total transport and harbour costs 31.53 51.50
exploration and restoration 2.85 4.66
Miscellaneous 1.98 3.23
Sub-total prospecting and miscellaneous 4.83 7.89
total 109.28 178.49
fINANcIAL AssEssMENt
The estimates of cash flow and net present va- lue are based on the following assumptions:
production can be gradually increased from
•
about 820 kt of ore (500 kt lump + fines) in year 1 to about 1,640 kt of ore (1,000 kt lump + fines) in year 2, and will reach 2.45 Mt of ore (1,500 kt lump + fines) in year 3 the total investment costs during the first
•
four years amount to SEK 838 million the average price for lump ore and fines
•
FOB Hargshamn is SEK 358 per tonne, about 80 per cent of the price in December 2007 (see market section)
the operating costs in year 1 amount to
•
SEK 265.00 per tonne of processed pro- duct (equates to SEK 162.30 per tonne of ore) and for year 2 to SEK 264.30 per ton- ne of processed product (equates to SEK 161.80 per tonne of ore)
operating costs from year 3 to year 13 (in-
•
clusive) are estimated at SEK 178.50 per tonne of processed product (SEK 109.30 per tonne of ore)
the residual value of plant and equipment
•
after the period of operation is negligible the ore reserves amount to 28.5 Mt with
•
35.2 per cent iron and 1.8 per cent man- ganese
the dollar exchange rate is 6.40 SEK/
• USD.
Based on the assumptions listed above, the net present value obtained for the expenditure for investments and operating cash flow from the iron ore project is SEK 956 million, at an dis- count rate of interest of 8%.
An increase of about 10% in the average price of the iron ore products (to SEK 394 per tonne of finished product) gives an NPV of SEK 1,327 million, while a decrease of about 10% in the average price (to SEK 322 per tonne of finished product) gives an NPV of SEK 586 million.
The Dannemora mine is primarily an iron ore mine, even though the conditions for pro- ducing crushed rock as a by-product are re- garded as good. In the estimates, only iron ore production was taken into account.
-600 000 -500 000 -400 000 -300 000 -200 000 -100 000 0 100 000 200 000 300 000 400 000 500 000 600 000
Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Yr 11 Yr 12 Yr 13 Revenue
Investment costs Operating costs
seK 000s
the iron ore price has increased dramatically since the beginning of 2004. the first results of the price negotiations for 2008 emerged in the middle of february, with the
news that the brazilian mining giant Vale had reached an agreement with several large Asian steel manufacturers regarding a 65% increase in iron ore prices.
IRON ORE MARKEt
OVERVIEW
Slag separation at blast furnace.
Jernkontorets bildbank.
Photo: Stig Göran Nilsson.
500 600 700 800 900 1000 1100 1200 1300
1970 1980 1990 2000 2010
Mt
the growth of the world economy continued during 2007. the extensive granting of credit to low-income American house buyers led to a disruption in the American and European banking systems. It is hard to judge what effect this will have on the global economy, although hitherto it seems to have been moderate. However, this has not affected the steel industry, where expansion has continued unabated, particularly in china.
stEEL pRODuctION
The peak years of the world steel industry continue. The demand for steel has increased for the ninth consecutive year. Total produc- tion of crude steel went up from 1,140 mil- lion tonnes (Mt) in 2005 to 1,240 Mt in 2006, an increase of 8.8 per cent. The increase in production continued during 2007, and total world production reached a record high of 1,343 Mt (provisional figures from the Inter- national Iron and Steel Institute, IISI).
The rapid development continuous domi- nated by China, where production of crude steel during 2007 rose to 489 Mt, an increase
World production of crude steel.
Jernkontoret. Source: IISI, 21 Jan 2008.
The historical milieu in Öster- bybruk is well preserved. Al- ready in the sixteenth century a blast furnace was in operation in the village.
of 16 per cent, accounting for more than a third of the world’s crude steel production.
The enormous increase in production in China in recent years means that the country has become a significant net exporter of steel.
This is affecting trade flows everywhere in the world.
stEEL cONsuMptION
2007 was the ninth year in succession to see an increase in worldwide demand for steel.
IISI estimates the increase to have been about 7 per cent in 2007, equivalent to 75–80 Mt.
This means that about 1,200 Mt of commer- cial steel products were supplied to the world market.
In China, demand rose by 11 per cent (40 Mt) to 400 Mt. More than half the world- wide growth in demand can be attributed to China.
IRON ORE pRODuctION
World production of iron ore increased in 2006 to 1,500 Mt, an increase of 12 per cent compared with 2005. This was the fifth year in a row that iron ore production increased.
World production in 2007 was expected to reach 1,650 Mt, again an all-time high. Chi- nese iron ore production in 2007 was expec- ted to reach 805 Mt, an increase of no less than 16 per cent.
The most significant iron ore producers
are Brazil, Australia, China and India. The exploration and expansion of new mines in Australia and Brazil is going on at a far grea- ter scale than in other regions, and future growth in production is bound to happen mostly in these countries.
Three major mining companies dominate the world’s iron ore production. Vale produ- ced about 324 Mt of iron ore during 2007, followed by Rio Tinto with about 209 Mt and BHP Billiton with about 152 Mt. Together they control 34.7 per cent of world produc- tion, and no less than 78.2 per cent of the sea borne iron ore trade. This means that they were able to exercise considerable control of the world market during 2006/2007.
The largest iron ore producers of the world in 2007.
Marketing manager Jan Vest- lund discuss with the Board member Niklas Nordström.
Company Country Capacity Mt/year
vale (cvrd Group) Brazil 323,8
rio tinto Group uK 209,3
BHP Billiton Group australia 151,6
Mittal arcelor uK 74,6
Privat intertrading ukraine 46,0
Metalloinvest russia 44,1
Metinvest Holding ukraine 38,6
anshan iron & steel china 37,0
evrazholding russia 36,5
cleveland cliffs usa 34,8
lKaB sweden 32,0
cvG Group venezuela 30,7
anglo american south africa 30,6
imidro Group iran 29,4
csn Group Brazil 27,6
shougang Beijing Group china 25,5
nMdc Group india 24,6
us steel usa 20,7
severstal russia 17,3
tRADE IN IRON ORE
The international trade in iron ore increased for the sixth consecutive year, reaching 825 Mt, an increase of about 8 per cent over 2006.
The structure of global imports of iron ore has changed substantially since 1990. At that time, European countries were entirely dominant, with 47 per cent of total imports.
The major change is China’s sharply increase in imports. From 14.3 Mt in 1990, China’s imports increased to 383 Mt in 2007. Most of this increase has taken place in the last few years.
According to the Raw Materials Group, iron ore exports in 2007 were about 825 Mt,
Major iron ore exporters in 2007.
Source: Raw Materials Data, Stockholm 2008.
The major iron ore importers in 2007.
Source: Raw Materials Data, Stockholm 2008.
*Figures from 2006.
Country Imports (Mt)
china 383
eu 25* 186
Japan 139
Korea 44
taiwan 17
Country Exports (Mt)
australia 295
Brazil 275
india 100
south africa 28
canada 27
sweden 19
Hargs hamn.
1. The large doc 2.The small dock 3. The ferry quay 4. The ore quay 5. The railway freight yard Photo: Hargs Hamn AB.
1
2 3
4
5
Unloading bridge for ore at the old process plant in Dan- nemora.
an increase of about 9 per cent from 2006.
Of this, 295 Mt came from Australia, 275 Mt from Brazil and about 100 Mt from India.
Swedish exports were a modest 19 Mt.
cONsOLIDAtION
Despite attempts in recent years to create even bigger steel companies through acquisi- tions and mergers, iron ore companies are still a step ahead when it comes to consolidation.
The five largest crude steel producers con- trol about 18 per cent of world production, while the five largest iron ore producers con- trol 41 per cent of production.
One example of mining sector mergers is the BHP Billiton bid for Rio Tinto. If the bid is accepted, the result will be not only the world’s largest mining company, but also the world’s third-largest company by capitalisa- tion (USD 300 billion). This would create an even more monopolistic situation in the iron ore sector.
The current concentration of iron ore production among a handful of companies is, however, not due mainly to acquisitions or mergers, but rather to the effect of produc- tion increases. The ability of the three major producers to respond quickly to increased de- mand from Asia has meant that their produc- tion has grown substantially faster than global production in general.
Above all, these production increases have
come from existing mines. Future additions to
production will increasingly come from newly
established mines, which in turn will probably mean higher operating and investment costs.
IRON ORE pRIcEs
The price of iron ore is set in dollars per per- centage of iron content. As a result of the increased demand, the price has risen shar- ply since the beginning of 2004. Prices are set through annual negotiations between the major steel producers and the major iron ore producers. These prices, so-called benchmark prices, then set the pace for other players around the world, with variations due to local circumstances.
With the growth in the pace of steel pro- duction that has occurred since 2000, world
output has increased over the last seven ye- ars from 850 Mt to more than 1,300 Mt in 2007. At the beginning of this period, iron ore producers had sufficient capacity to meet the increased needs, but since 2006, and par- ticularly during 2007, there has been a shor- tage of iron ore on the market. Furthermore, the global need for other raw materials, such as coal, has grown in equal measure, resulting in sharply increased transport costs.
Analysts believe unanimously that the shortage will persist for another year or two, before reaching a balance between supply and demand. Price forecasts are consistently positive, with expectations of sharp increases in 2008.
Iron ore prices 1998-2007 and indicated prices for 2008.
Raw Materials Group.
The market for bulk freight is expected to normalise once the bottleneck in the loading ports have been addressed. The shipping companies’ fuel costs will remain high or even rise, particularly in view of the environmental requirements being imposed on vessels in the Baltic.
Published prices for fines rose by about 10% during 2007. Price increases for pellets and lump ore were somewhat lower. The first results of the price negotiations for 2008 emerged in the middle of February, with the news that the Brazilian mining giant Vale had reached an agreement with several large Asian steel manufacturers regarding a 65%
increase in iron ore prices. The 2008 price negotiations were influenced mainly by three factors:
demand
• continues to exceed production capacity
a merger is being discussed between the
•
two largest Australian producers, BHP Bil- liton and Rio Tinto
the Australian iron ore mines are proposing
•
that the price for 2008 should be negotiated with a C&F price (Cost and Freight) China as the comparison.
The sharply rising spot prices to China have given the sellers a powerful negotiating argument. During 2007, some Chinese steel- works were prepared to pay nearly twice the negotiated price.
Trade flows in iron ore pro- ducts.
0 50 100 150 200 250
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Pellet Lump Fines USc/Fe unit
