Iron Ore Price Tumbles; Mexico Takes Stand Against Smuggling

Precious metals got a boost this week as Ukraine mobilized for war following Russia’s seizure of Crimea. Unfortunately, iron ore has not been quite so lucky — its price slipped this week to an eight-month low.

Specifically, benchmark 62-percent grade iron ore for immediate delivery to China was selling for $116.70 per tonne on Wednesday. Dragging it down was poor Chinese steel prices, which sank on Beijing’s announcement that it will “ease the pace of investment to a decade-low, in pursuit of more sustainable economic expansion” and in an effort to curb pollution, a major problem in the Asian nation, as per Reuters.

Moving forward, expect more of the same. The news outlet states that “spot supply continues to outpace demand.”

Mexico stands against iron ore smuggling

Across the globe, Mexico made waves this week by cracking down on the Knights Templar gang, which has been smuggling iron ore in the state of Michoacán.

The country sent over 400 federal agents and military personnel to raid “various storage yards located in the Port of Lazaro Cardenas, as well as other yards located in along the border with the State of Guerreo,” according to Mineweb. Altogether, 119,000 tonnes of iron ore valued at $15.4 million were seized, along with “heavy equipment, as well as trucks, backhoes, conveyers, crushers, and generators.”

While it might sound strange for a gang’s illegal activity to be centered on iron, the publication states that in fact mining has become one of the main sources of income for the Knights Templar. Explaining how that came about, Raul Benitez-Manaut, a security analyst who studies organized crime in Mexico, told The New York Times that drug cartels moved from “coordinat[ing] with Chinese shipping outifts to bring chemicals needed to produce methamphetamine” to working with them to smuggle iron ore to China.

The Mexican government believes this week’s raid was a major blow to the gang’s operations.

Company news

On Thursday, London Mining (LSE:LOND) put out its 2013 financial results, commenting that its revenue came to US$299.4 million from sales of 3.7 million wet metric tons of iron ore concentrate from its Sierra Leone-based Marampa mine.

Commenting on the results, Hunter Hillcoat, an Investec analyst, said, “[t]he earnings are in line with our expectations but slightly below consensus so that might be seen as a negative. But we are encouraged by the new offtake with Cargill, which takes up their offtakes to 5 million tonnes per year now or almost all of their production, and the fact that Cargill is paying them $20 million,” as per Reuters.

Junior company news

Starting off the week on a high note, Century Iron Mines (TSX:FER) on Monday released the results of a NI 43-101 mineral resource estimate on its Joyce Lake DSO project, which is part of the Newfoundland and Labrador-based Attikamagen project. The project has seen a 143-percent increase in its measured and indicated resources — specifically, Joyce Lake has a measured and indicated mineral resource of 24.3 million tonnes at an average grade of 58.55-percent iron, as well as an inferred mineral resource of 0.84 million tonnes at a cut-off grade of 50-percent iron.

The next day, IMX Resources (TSX:IXR,ASX:IXR) announced that it has been successful in testing the first exploration prospect at its Mount Woods magnetite project for direct-shipping hematite.

John Nitschke, the company’s acting manager, commented, “[w]e are encouraged by the outcome of this work, which has confirmed the presence of hematite on the Mt Woods leases and verified our exploration model, including the application of ground-based gravity as an exploration technique. This is a solid basis for our exploration team to move forward and further refine our targeting to identify shipping grade material.”

Finally, just yesterday, Lion One Metals (TSXV:LIO,OTCQX:LOMLF) provided the results of the initial NI 43-101 mineral resource estimate for its South Australia-based Olary iron ore project. Highlights include an indicated mineral resource of 214 million tonnes at 26.3-percent iron and an inferred mineral resource of 296 million tonnes at 26.4-percent iron.

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 

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