Fortescue Metals, the third-largest iron ore miner in Australia, is considering a listing of its joint venture with China’s Baosteel in either Hong Kong or Shanghai. Chief Executive Neville Power said in a media briefing at the Boao Forum that the group was studying the feasibility of an initial public offering (IPO) of FMG Iron Bridge, an iron ore project it jointly develops with Baosteel in Western Australia. In selecting the listing destination, Power said, the group would take into account “the capacity of fund-raising” in the market. He said the funds raised would be used on the project’s development, without disclosing further details. In December, Fortescue said the Iron Bridge project was estimated to have about 5.2 billion tons of resources. Currently, the group owns 88% of the project, while Baosteel owns the remaining 12%. Fortescue, a smaller rival of Australian iron ore giants Rio Tinto and BHP Billiton, is heavily reliant on exports to China. Last year, 60% of the 100 million tons of iron ore it produced were sold to China, and this year it expects to raise output to 155 million tons, about two-thirds of which will be exported to China. Urbanization in China is a key driver for the demand for steel and Power expects a roughly 3% to 4% growth in demand for steel in China this year. Strong car sales and housing demand would also support the country’s steel market in the long term, he added. The price of iron ore has been falling since last year as the market cooled quickly due to an oversupply of steel around the world. Goldman Sachs said in a report in April that it had lowered its forecast for iron ore prices by 3% to USD139 per ton for this year. The downward trend would continue in the next two years, dropping to USD115 next year and USD80 the year after. Power said he expected the iron ore price to fluctuate between USD120 and USD130 per ton for the foreseeable future, and added that now was a good time to introduce Fortescue’s advanced experience in supply-chain management to those Chinese steel manufacturers that were trying to upgrade equipment and raise production efficiency, the South China Morning Post reports.

Australian tycoon Clive Palmer, who is in a court dispute with Citic Pacific over iron ore royalty liabilities, has said the conglomerate’s recent decision to swap external auditors for the first time in more than 25 years raises questions about its transparency. Hong Kong-listed Citic Pacific, the steel-to-property flagship of Beijing-backed conglomerate Citic Group, said that its board has proposed to its shareholders that KPMG be appointed as its auditor, replacing PricewaterhouseCoopers (PwC), to “enhance the efficiency of the audit process”. Palmer’s firm Mineralogy signed an agreement in 2006 to sell Citic Pacific the right to mine up to 6 billion tons of iron ore in the state of Western Australia. “Why sack the auditor”, Palmer asked in a statement. “Is it because the auditors required them to list their debt to us as a current liability in the [annual report]?” A Citic Pacific Spokesman refused to comment on the matter. On March 26, Palmer said Citic Pacific was trying to avoid royalty payments because it was in financial difficulty. Citic Pacific’s 2012 annual report books a HKD1.52 billion provision on its mining rights under current liabilities – items payable within a year. Citic Pacific said on March 22 the provision was made on a potential liability related to a royalty payment. According to the 2006 agreement, if either of two subsidiaries of Citic Pacific failed to produce at least 6 million tons of processed iron ore by March this year, each would have to pay royalties on the raw ore required to produce 6 million tons of processed ore. Citic’s iron ore project in Australia has been delayed by three years, hence its failure to produce iron ore. On March 18, Mineralogy launched a lawsuit against Citic Pacific, seeking royalties of around HKD1.58 billion. It is unclear whether Citic Pacific’s change of auditor is related to Beijing’s stipulation that central government-administered state firms should change auditors at least once every five years. Hong Kong-registered Citic Pacific is 57.5%-owned by Citic Group, the South China Morning Post reports.

An Australian judge has expressed reluctance to let Clive Palmer cancel a AUD215 million mining right transfer agreement signed seven years ago with Citic Pacific over Citic’s failure to pay royalties. Citic Pacific has already spent AUD7.1 billion on infrastructure on the site in Western Australia owned by Palmer, and expects to start shipping processed ore next month, three years later than planned, after construction delays. According to the agreement made in 2006, Sino Iron agreed to pay Mineralogy a royalty quarterly on raw ore “taken” by Sino Iron, made up of a payment of AUD0.30 per ton of ore taken, and an additional royalty based on a formula using the volume of processed ore produced and its market price. Citic Pacific agreed to start paying royalties on extracted ore after it was crushed and weighed. Palmer claims that the royalty is due when the ore is removed from the ground. Citic Pacific’s lawyer said the firm will pay the royalty if it is found liable.

China Polymetallic Mining, the biggest lead and zinc resource holder in Yunnan province, is exploring opportunities to acquire resources in neighboring Myanmar. Earlier this year, the miner sent a geologist and other staff to scout out investment prospects recommended by Myanmar government officials eager to see foreign investment in the country’s largely untapped mineral wealth. The chances of acquiring mining assets in Myanmar are much higher and the operating costs are lower compared to China, Chief Financial Officer Li Tao told the South China Morning Post. Competition for mining assets in China was keen, he added, which meant prices were often bid up despite the fact that many of them were higher-risk early exploration projects. Foreign firms were expected to be allowed to have wholly-owned projects in Myanmar, and they would enjoy five-year corporate tax holidays, Li said. The terms are part of Myanmar’s new mining law that is expected to be passed this year to boost investment. Li said careful due diligence was important as there were legal, political and security risks to consider. China Polymetallic might avoid the less stable northern region and focus on the east, he added. Li estimated the acquisition process to take at least a year before a deal could be sealed. Under an internal guideline, any asset acquired by China Polymetallic should have an estimated internal rate of return of at least 25%. The firm bought three mines in Yunnan last year and has been designated by the provincial government as a consolidator of its mining sector. It posted a net profit of CNY177 million for last year, compared with a loss of CNY244.3 million in 2011, as it ramped up output at its mainstay Shizishan mine that began production in mid-2011. The mine’s lead output is targeted to rise to 38,500 tons next year from 20,300 tons last year, while zinc output will increase to 28,700 tons from 16,500 tons. About 75% of lead consumed in China is used in battery manufacturing, while zinc is mostly used to coat steel to prevent corrosion. The company budgeted CNY319 million this year to expand or develop its six mines, four of which are expected to come on stream by June 2015.

China Shenhua Energy has asked its coal mining units to cut their production costs for each ton of coal by 5% in the face of tough market conditions, Vice President Zhai Guiwu said on the sidelines of the Coaltrans conference in Beijing. Sales this year are expected to be flat from last year’s 464.6 million tons. Smaller rival Yanzhou Coal Mining is also expecting flatter production costs this year at its main production base in Shandong. Its total sales target is 89.9 million tons, 4.6% lower than last year. Qu Jianwu, Director of the Taiyuan Coal Trading Center, said among 90 of the nation’s largest coal miners, 22.3% saw a lower profit last year while another 21.1% posted losses. Weaker industrial output and ample hydro-power supply meant power station coal consumption grew only 0.6% last year to 2.9 billion tons, while consumption of coal used to smelt steel rose 1.7% to 550 million tons, he said. In the first two months of 2013, coal-fired power output grew just 1% year-on-year, against 23.9% growth in hydro-power, according to the National Bureau of Statistics (NBS).

China will refuse to grant new licenses to iron ore importers unless they participate in a domestic trading platform. China, which buys around two-thirds of the world’s one-billion-ton plus sea-borne iron ore, has been attempting to regain the upper hand in pricing the steel making raw material since grudgingly accepting an industry-wide shift to spot pricing after four decades of a yearly-set price mechanism ended in 2010. Under new rules, traders and steel mills seeking a new license to import will now have to trade at least 500,000 tons of iron ore on the platform set up by the China Beijing International Mining Exchange (CBMX). Only Chinese firms are eligible for import licenses. China’s first physical iron ore trading platform competes with the globalORE platform in Singapore, but the new rules, in a country with tens of thousands of iron ore traders, could give CBMX more business and boost liquidity. Global miners BHP, Vale and Rio Tinto and Chinese steelmakers including Baoshan Iron and Steel are members of both platforms. China has long suspected that iron ore pricing is manipulated by some miners and traders and wanted a platform that it deems more transparent, although miners may be wary of Beijing gaining control if more business flows to the exchange. CBMX launched the physical trading platform, together with its own iron ore pricing index, on May 8 last year. Steel mills applying for a license are also required to have an annual output of more than one million tons of crude steel and steel making facilities that meet state environmental requirements. Importers already holding a license would not be affected by the new regulations.