As iron ore prices continue to fall, major mining companies such as Rio Tinto (ASX:RIO) are pushing production to new levels much to the chagrin of other industry players. Many companies have come out in opposition of Rio Tinto’s decision to push more iron ore into the marketplace. Mining magnate and Fortescue Metals (ASX:FMG) chairman Andrew “Twiggy” Forrest recently offered to put a cap on Fortescue’s production if other companies would do the same. Mr. Forrest defended his position later, saying “If you have read my comment given in a Chatham House Rule private environment in a private club, then I can say I am not stepping back from them at all. They were driven by the market share over shareholder value argument that we are in right now.”
Rio Tinto CEO Sam Walsh fired back at his opposition, saying the offer from Mr. Forrest was “nonsense” and a “harebrained scheme”. The comments made by Fortescue’s chairman are now under an ACCC investigation for potentially breaching competitive law. “I don’t know what he was thinking,” Mr. Walsh said. He went on further to say that he could “assure you” that Rio Tinto does not collude its competitors. Mr. Forrest had earlier cited Glencore CEO Ivan Glasenberg’s decision to slow coal production as supporting evidence for an iron ore cap. “It hasn't happened in coal. Glasenberg withdrew a significant amount of coal from the market, no one stepped in," he said. As mining industry executives continue their spat, iron ore prices continue to fall. Iron ore fell to less than $US55 per tonne recently, less than one third of its record peak of $US190 in 2011. It is currently sitting around $US63 per tonne.
Author: Simon Herrmann
Mar 26, 2015
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.