Economics

16:15, 20.02.2008 | World

London-listed miner Aricom Plc will ship the first iron ore concentrate from its mine in the Russian Far East by June and expects favourable freight rates and strong world prices to underpin expansion projects. Chief Executive Jay Hambro said on Tuesday Aricom's Kuranakh project, where mining began in October, would be able to supply concentrate to the Chinese border at a freight rate of $13.44 per tonne.

"We'll be producing a saleable concentrate and selling with a freight advantage," Hambro told the Adam Smith Conferences CIS Metals Summit.

He said current freight costs between Brazil and China, the world's largest iron ore consumer, were $50-60 per tonne of iron ore. From Australia, the cost was $40-50 per tonne. "We'll be able to sell at a quarter of the freight cost from Australia," he said.

Aricom's Kuranakh project will ship 900,000 tonnes per year of titano-magnetite ore, containing an average 62 percent iron, as well as 290,000 tonnes of ilmenite, the ore from which titanium sponge or dioxide is made.

The company has an offtake agreement with China National Gold Group Corporation, although will also have some extra ore left over for sale. Prices will be set quarterly based on the average global price in the preceding three months.

World iron ore prices are underpinned by strong demand from China, which produced more than a third of the world's steel last year.

Prices are set for more gains in 2008 after Japanese and South Korean steel mills on Monday agreed to a 65 percent jump in benchmark prices from Brazilian miner Vale . Australian miners may hold out for even more. [ID:nPEK348125]

Aricom's larger Garinskoye and K&S projects, which are both due to be producing by 2010, would be able to supply to China at a freight cost of $11 and $9.15 per tonne respectively, delivered at frontier, Hambro told the conference.

The freight cost from the K&S project would drop by a further $4 per tonne after a railway bridge linking Russia and China is completed, he added.

Aricom is investing in the bridge, which will link Russia's Jewish Autonomous Region -- where the K&S project is located -- and the northern Chinese province of Heilongjiang.

The K&S, or Kimkan and Sutara, project is scheduled to produce 10 million tonnes a year of ore, from which 4.3 million tonnes of concentrate can be produced.

Garinskoye, where ore grades are higher, would be able to yield about 6 million tonnes of concentrate from a similar 10 million tonnes a year of ore, Hambro said.

Aricom is also considering producing pig iron in Russia.

"A large portion of beneficiation will take place within the Russian Federation," he told the conference.

-Reuters