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Iron Ore: The Cornerstone of WAs Mining Sector

30 January 2024 11:57
Feature 1

Lithium experienced a breakthrough in 2020, earning the moniker ‘white gold’ amidst the global energy transition.

However, the current scenario paints a different picture, as lithium prices have plummeted by over 80% in the past year, prompting major industry players in Western Australia to shift their attention elsewhere.

While lithium faces a pricing rut, iron ore remains a steadfast cornerstone in WA’s mining sector, with sustained momentum leading to significant profits for major mining companies like BHP, Rio Tinto, and FMG.

Iron Ore in WA

Western Australia has the world’s largest reserves of iron ore with 30% of the global supply, surpassing other major players like Brazil (19%), Russia (15%), and China (12%).

In 2020–21, the Western Australian Government received a staggering $9.8 billion in royalties from the iron ore mining industry in the state.

Despite the push toward greener energy and mining critical minerals, which are essential in this transition, iron ore has remained a pillar of wealth for the State and mining companies operating in the sector.

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Figure 1: Iron Ore Price Chart. Trading Economics

The price of iron ore is influenced by global economic growth, which dictates its supply and demand dynamics.

During periods of economic expansion, the demand for steel in construction rises, consequently propelling the spot price upwards.

Growth in China’s economy, as the world’s largest consumer of metals, has significantly influenced the price of iron ore. The two are so intrinsically linked that the spot price of iron ore can almost be considered a proxy for China’s economic health.

Australia has the world’s largest estimated reserves of iron ore with 52 billion tonnes, and according to GlobalData, is the world’s largest producer of iron ore with an output of 932Mt in 2022, playing a pivotal role in this market.

Companies Riding the Wave

Despite increasing skepticism in the market, Australia’s mining giants, including Rio Tinto, BHP, Fortescue Metals Group, Mitsui and Mineral Resources, continue to thrive and generate substantial profits, particularly in the iron ore sector.

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Figure 2: Australia iron ore production. GlobalData

BHP (ASX:BHP)

BHP, a global leader in commodities such as iron ore, copper, and nickel, has an impressive market capitalisation of $237.57 billion.

Its Western Australia Iron Ore (WAIO) business contains five mines across the Pilbara region of WA, features four processing hubs and two port facilities, contributing significantly to the Company’s fiscal success.

BHP recorded significant revenue for the fiscal year ending June 30, 2023, reporting an annual revenue of approximately $53.8 billion U.S. dollars.

Rio Tinto (ASX:RIO)

Similar to BHP, Rio Tinto has a significant presence in the Pilbara, operating 17 iron ore mines, four independent port terminals, and a 2,000-kilometre rail network, along with related infrastructure.

With a market capitalisation of $48.93 billion, the Company has gross sales revenue of approximately $55.6 billion U.S. dollars.

In Western Australia, Rio Tinto produces five iron ore products, including the Pilbara Blend, renowned as the world’s most recognised brand of iron ore, crucial for steelworks as sinter plant feed or direct blast furnace feed.

Fortescue Metals Group (ASX:FMG)

FMG is a WA-based company focused on becoming the number one integrated green technology, energy and metals company.

Operating in the resource-rich Pilbara region, FMG, holds a substantial market capitalisation of $90.05 billion AUD, and stands among the world’s largest iron ore producers.

The Company recorded significant profits of $16.78 billion U.S. dollars. in annual revenue for the fiscal year ending June 30, 2023, demonstrating its ongoing financial success.

Mineral Resources (ASX:MIN)

Mineral Resources (MinRes) stands out as a diversified resources company with significant operations in lithium, iron ore, energy, and mining services across Western Australia.

Notably, the Company has earned its status as one of the ASX’s best-performing entities since its listing in 2006, boasting a market capitalisation of $11.67 billion.

As the fifth-largest iron ore producer in Australia, MinRes operates three iron ore hubs in the Yilgarn, Pilbara, and Ashburton regions, achieving an impressive annual revenue of $4,779.1 million AUD in 2023.

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