Australian junior miner Venture Minerals VMS.AX has temporarily suspended operations at its controversial Riley iron ore mine in northwestern Tasmania after just a single shipment, the company said on Friday, hit by a plunge in prices.
The project’s location in the wilderness of Australia’s southernmost island drew the ire of green activists, who have held multiple protests there since March, as the Bob Brown Foundation calls for World Heritage listing of the area.
Its sole shipment of 45,632 tonnes was bound for China through off-take partner, Prosperity Steel United Singapore Pte Ltd.
The company is completing a full review of the mine in response to declining market conditions and shipping costs that were higher than expected, it told the Australian stock exchange in a filing.
While the company feels some pressures will prove fleeting, it said, “Venture believes the best course of action is to temporarily suspend mining operations to preserve the reserve base.”
It plans to retain employees until market conditions improve, it added, to ensure “the company can recommence operations immediately”.
Shares of the company fell as much as 42% on the news, before recovering a little to end down 29% at 0.055 Australian cents.
Australia is the world’s biggest supplier of iron ore, with about half the global supply of the steel-making raw material dug out of the dusty red plains of the Pilbara region in its west, by the likes of Rio Tinto RIO.AX.
Iron ore prices were on a tear when Venture Minerals brought on the mine this year, eventually peaking above $220 a tonne in mid-May, boosted by Brazilian supply constraints and shipping snarls stemming from the COVID-19 pandemic.
But prices have halved since, reflecting easing demand from steelmakers in China and stricter environmental controls ordered by Beijing.
On Friday, investment bank UBS said it expected iron ore to average $89 a tonne next year, and put a sell rating on Rio.
Venture Minerals said each shipment was bringing in less than it had estimated against benchmark 62% prices in a 2019 study, as the discount for its 57% iron ore has also widened to 30% from 10%.
Congestion at Chinese ports and coronavirus constraints have pushed shipping rates to about $54 per tonne from the $18 expected in initial studies, it added.
The project was expected to run for two years, shipping out 800,000 tonnes of ore annually, while creating more than 100 jobs and injecting about A$100 million into the state’s economy, the miner had estimated.
Venture Minerals has launched a study to develop a tin mine at the neighbouring Mt Lindsay in the Meredith Range Regional Reserve, which conservationists call a valuable rainforest area.
Source: Reuters (Reporting by Riya Sharma in Bengaluru; Editing by Uttaresh.V and Clarence Fernandez)