Tuesday, December 30, 2014

WI project would mine iron ore already facing glut

[Updated from Monday, 11:10 a.m.] I think you can draw a straight line from the iron ore market glut - - noted here earlier, too - - to the stalled GTac mine proposal in the pristine Bad River watershed in northwest Wisconsin.

Despite little new activity reported by the DNR at the site, there on the books sits the sweetheart iron ore mining bill that GTac and its insiders helped write - - along with a companion bill to limit access to publicly-subsidized forest land in the area.

Also on the record is the previously-secret $700,000 donation routed to Gov. Walker's 2-12 recall campaign by the company through a third-party, conservative advocacy ally.

The collapse of the Wisconsin's environmental and open government ethic mirrors the free fall in the iron ore price.

Updates: The iron mine issue has been covered repeatedly by the Stellareport blog created by northern WI Atty. Anthony Stella, Jr.

Also cited, here:

Check it out.


Anonymous said...

That's the whole point -- buy while the market is down.

China is dumping dollars and buying real assets instead -- this would be an ideal time to load up on iron ore mines -- something China has been doing.

The last budget makes it legal to sell the mine to China -- Gtac never intended to operate this mine -- much more money in selling the rights and telling Native Americans to go sue China if they think their rights have been violated.

Its all laid out here:


Anonymous said...

Unfortunately, this is a likely scenario. And our Governor, Lt. Governor and Republican legislators are promoting it at the expense of Wisconsin citizens.

Wisconsin Green Senator's Shadow Staff said...

A few thoughts. First, the Cline Group launched into this harebrained project when commodity prices were starting a sustained upswing following the trough of the Great Recession. Cline also began a raging diversification program to get into oil and gas investments, frac-sand mines, possibly rail shipments of fossil fuels and the sand that keeps the wells open, all about the same time.

Now, all of that diversification is looking like a boatload of heavy debt cargo on a Great Lakes freighter en route with some big holes in its hull, in a winter storm.

To take one example, one of Cline's pyramidschemelike holdings, Natural Resource Partners, looks like this (source markets.financialcontent.com) --having hit a new 5-year low price just today:

YTD -53.09%
1 Month -21.27%
3 Month -28.46%
6 Month -43.27%
1 Year -52.74%

It's not any better over in China. Folks who think that China is this all-powerful financial genius superpower may be buying into a myth, too. Chinese total bank debt has ballooned from $1 trillion in 2001 up to $25 trillion today. Without a corresponding 2400% increase in its GDP...

It seems very unlikely that this mine project is going to come to fruition, whether American-owned or Chinese-owned. Much more likely seems an epic-scale crash of, well, epic proportions again in the global banking system.

Leaving the Iron County Corruptibles (County Govt.) heavily coated in egg, not just egg-on-face...

clyde said...

The front man for the international mining corporations is not after iron ore in the Penokee Hills. If the primary corporate objective in the Bad River headwaters is actually the mineral resources that are located there, it is almost surely not iron they are after. They are probably not even primarily seeking minerals in that particular location - although they will (and can, thanks to the very first legislation that was enacted during the Walker administration) certainly take, with absolute and complete unrestricted impunity, whatever they can get there, after the extensive smoke clears.

No, the international extractive industry conglomerates are seeking something much more valuable to them than whatever minerals may be buried there. They are seeking a well-groomed, all lined-up legal case, in a perfect venue for them, that will let the U.S. Suupreme Court rule expansively and clear the legal decks of the human rights principles that are protecting indigenous treaty rights and first nations sovereignty.

I think it is better to assume that these players have a pretty good idea of what the hell they are doing, and that they are not merely a bunch of idiots, making a series of stupid, costly mistakes. Better to assume that they are getting their ducks in a row.

Anonymous said...

Wisconsin Green Senator's Shadow Staff

No one here, nor anywhere else I follow, claims China is an "all-powerful financial genius superpower" but they are projected to soon be the largest global economy (and already are by some metrics).

The point is this: they are getting out of the dollar, no longer want to hold this paper, and prefer assets -- there isn't enough gold, so other minerals/resources will do.

There is no reason to believe that manufacturing will make a comeback in any real way in America and this is by design -- bill clinton said we would be a "service economy" as a result of so-called "free trade" and related agreements.

Gtac new that there would be more money in getting this thing approved and then selling mining rights. In fact, current free trade agreements can be misrepresented that it will be a violation to impinge on China's sovereignty to mine once they own the rights.

And credible reports state that the currently secret TARP treaties will clearly make it a violation to prevent China from exploiting mining rights in America for such silly reasons as our ecology, Native American treaties, etc.

So your have no basis for your claims that it is unlikely mining will happen other than your straw-man argument that anyone that says otherwise has proclaimed China to be a "all-powerful financial genius superpower"

Nice try -- but can't you provide some real rational for your comment?

When you are in it for the long-run -- as China obviously is -- there is no reason to worry about current price of iron ore. In fact, this makes it a buyers market.

Anonymous said...

There will be no iron ore mined in northern Wisconsin at $60.00/ton for 62% iron content. In fact, if anyone could figure out how to ship mud out of northern Wisconsin and make money at $60.00/ton f.o.b. Superior docks, they would be financial geniuses.

Current forecasts show iron prices dipping into the $52-$55/ton range during 2015, this is almost a certainty given the start up of a very large Australian mine in 2015, and the big $6-billion Rio Tinto mine in 2016. Only Rio Tinto, Vale, Brilliton, and Fortescue can make money at the that price--most of the Chinese mines have closed or shortly will be closed.

But I feel reasonably certain however, that the GOP will, when Gtac announces its abandonment of the mine, blame environmentalists, democrats, "the government" and native americans.

Johnny M. said...

Anon 11:41

You mean the iron mines that China has financial interests in? (more here: http://www.miningaustralia.com.au/news/palmer-says-chinese-companies-are-raping-australia)

China’s steel mills – mostly state owned - purchase around 70% of the world’s traded iron ore. China loves high-quality, cheap iron (http://www.hellenicshippingnews.com/china-has-played-its-hand-in-the-iron-ore-market-very-well/)

"Whoever is in charge of China’s iron ore public relations should get a raise this year. China has done a great job of pushing down iron ore prices while still buying it. China imported 778.9 million tons of iron ore during January through October, which marked a year-on-year jump of 109.9 million tons. Chinese iron ore imports were up by 109.9 million tons during January through October, which came very close to matching the growth in global iron ore production, but global iron ore prices still declined during January through October by almost 50%. A decline in iron ore imports finally occurred in November, with global iron ore miners being less eager to sell into low prices, some global miners shutting down, and Chinese demand falling due to the APEC summit in Beijing, which temporarily reduced Chinese steel production (steel production has since rebounded)"

Price matters, but not as you would think, the Chinese government is not Carnegie Steel.

"The demand for iron ore is highly inelastic – at current prices iron ore accounts for around one quarter of the final value of steel, but the demand for steel is determined primarily by demand from the construction, infrastructure and manufacturing sectors. As a material with few substitutes, the consumers of steel tend to demand steel based on their need, rather than its price."

"market economics that even nominal Communists understand is that increasing supply in markets with inelastic demand can in fact reduce overall revenues – in fact can lead to a situation where buyers get more of the product for less of their money. As such, upstream investment in unprofitable production can make economic sense in a convoluted manner."

"A signal that this might be occurring would be new production being developed that would never be considered by rational investors, where the expected returns just don’t justify the risks. One such investment was Clive Palmer’s Sino Iron joint venture development. Original estimates suggested that this operation would require US$2.5 billion to bring to operation, although costs ended up being closer to US$10 billion."

More at: http://www.miningaustralia.com.au/features/digging-beneath-china-s-interest-in-australian-iro

In other words, economic theory will not fix the problems that it's applications create.

Anyone that thinks business-as-usual economics will protect us from exploitation of iron mining in Northern Wisconsin is mistakenly assuming that every other entity in the world bows before simplistic models of supply and demand.

That is simply not the case here. Proof?

The folks that buy the most iron ore in the world are also the same folks pushing the price down.

Wisconsin Green Senator's Shadow Staff said...

Anonymous person, sorry if I seem to have insulted you with the comment about the omnipotent Chinese. What your comment and Johnny's do speak to is that China does seem to be loading up on ore, still, despite what looks to be a developing deflationary environment.

As the anarcho-capitalists who post on the Zero Hedge like to point out, so much of the Chinese "miracle" has been owing to the creation of one enormous debt bubble that makes even the USA's enormous debt bubble look humble. A sort of "superpower debt bubble" I guess you could say. All the surplus buildings with no residents, highways carrying apparently no traffic, etc.

More worrisome is your own comment about that "the currently secret TARP treaties will clearly make it a violation to prevent China from exploiting mining rights in America for such silly reasons as our ecology, Native American treaties, etc." Combine that with Clyde's remark "They are seeking a well-groomed, all lined-up legal case, in a perfect venue for them, that will let the U.S. Suupreme Court rule expansively and clear the legal decks of the human rights principles that are protecting indigenous treaty rights and first nations sovereignty."

That set of conditions looks really worrisome, regardless of what happens with the global debt bubble itself, the timing of when it blows, etc.

Anonymous said...

It looks to me like as soon as the permit is approved, the mining rights will be sold.

Anonymous said...

I don't know who would want the rights to lose about $75 a ton mining iron ore from that deposit. There are easier ways of losing money.

Anonymous said...

anon 3:29

You "loosing $75 per ton" figure is way off base -- probably why you didn't provide any documentation. Perhaps you're just a drive-by...

Who would want to buy the rights to operate that mine?

An entirely vertically integrated entity that will directly benefit from processing and selling it as steel -- the money that you are calling a "loss" will be more than made up for in the added value of:

1. Turning it to steel

2. Using that steel to produce structural steel, construction, and consumer good

If one entity is buying the vast majority of iron ore anyhow and is not a multinational corporation -- there will be money made by keeping the price of steel low and being able to dominate that industry.

Remember, the mine in question is exceptional high quality iron once its processed.

Also -- owning the mine will be a tangible asset and not fiat currency like the dollar.

And who is getting out of the dollar, buying most of the world's iron, directly benefits from low process, and operates from a completely different perspective of multinational capitalists?

Communist China!

Anonymous said...

Dear Anonymous,

When you wake up from your dream about this mine consider this:
1) this "exceptional deposit", dips at nearly vertical; 2) the sidewalls must slope at 20 - 24 degrees to avoid collapse; 3) use mathematics to figure out the tonnage of overburden and the distance it must be moved to remove the ore; 4) read a little history to discover that this deposit was abandoned (in the midst of a steel-consuming war) in the mid-1960s because it cost too much to work; 5) why have none of the nearby Michigan mining companies expressed an interest in this mine--remember they haul their ore right past this deposit, they have the personnel, the equipment, and the expertise--and they are not interested; 6) so why haven't any steel companies expressed any interest in the past 40 years? probably because they can buy cheaper ore. 7) China will buy cheaper ore on the open market and it will remain cheap because two gigantic mines, one in Australia and one in South America are coming on line in the next 16 months; 8) an asset that costs in excess of its yield is worthless.

There will never be one shovelful of commercially mined iron ore lifted in northern Wisconsin.

Dr. Morbius