Iron ore prices dropped to multi-year lows in 2015 and the outlook at the end of last year was extremely bearish. Iron ore prices dropped amid a slowdown in demand from China, the most important consumer for the raw material, and increasing supplies.
At the peak of the commodities boom, major producers such as BHP Billiton (NYSE: BHP) and Rio Tinto (NYSE: RIO) invested heavily to increase their production. Their bet was that increased production would meet China’s ever rising demand.
But as China began its transition from an investment- and export-led economy to one led by consumption, its demand for raw materials slowed down considerably. Unfortunately for mining companies, this slowdown in demand coincided with increasing supplies.
Instead of scaling back though, majors have continued to ramp up production. Their strategy is to win market share at the expense of lower prices. Once the market re-balances, major miners such as BHP and RIO believe that will get better prices and also enjoy higher market share.
The strategy though has hurt miners’ cash flows and is likely to put pressure in the medium term.
Still if majors can get through this period, they have the potential to generate significant long-term value for shareholders.
New Millennium Iron Corp. (TSX:NML) is a Calgary-based company, with an extensive property position in Canadas principal iron ore district, the Labrador Trough, straddling the Province of Newfoundland and Labrador and the Province of Québec, in the Menihek Region around Schefferville.
The company’s project areas are connected via a well-established, heavy-haul rail network to the Port of Sept-Îles, Québec. NML is in a strategic partnership with Tata Steel, a global steel producer and industry leader. Tata Steel owns approximately 26.2% of the Company and is the Companys largest shareholder.
Together through Tata Steel Minerals Canada Ltd., which is owned 94% by Tata Steel and 6%
by the Company, the two companies have developed a direct shipping ore (``DSO``) project that is producing and shipping sinter fines.
Yesterday morning, New Millennium Iron announced the filing on SEDAR of the National Instrument 43-101 compliant technical report ("Report") stating the highlights of Pre-Feasibility
Study (``Study``) results for the Company``s NuTac project initiative (see news releases 16-15 dated June 9, 2016 and 15-12 dated September 16, 2015).
The Company seems to have a similar strategy to the above mentioned majors in that they arelaying the groundwork for a future time when commodities see a new leg up from increased demand and decreased supply. The stock has been trading in wild swings, but as of today, shares of NML are priced at around the same level as they were at the beginning of the year.
