SYDNEY (Reuters) - Glencore Xstrata Plc (GLEN.L) said it will halt production of iron ore in Australia next month, citing deteriorating market conditions and ending a two-year experiment to gain a toehold in the sector.
The company has been producing 1 million tonnes of iron ore concentrate a year for Asian customers as a by-product from its Ernest Henry copper mine in north eastern Australia since mid-2011. Glencore’s iron ore output is very small compared to that of Anglo-Australian miners Rio Tinto (RIO.AX) (RIO.L) and BHP Billiton (BHP.AX) BLT.L.
“The business case, which made magnetite production a positive contribution to Ernest Henry’s operations, is not supported in the current market,” an Ernest Henry Mining spokeswoman said. Magnetite is a form of iron ore.
“Falling revenue, increasing production costs and ongoing high logistics costs in getting our product from mine to market have eroded the margins in this business,” the spokeswoman said.
In the days following Glencore’s May 2013 takeover of Xstrata, chief Executive Ivan Glasenberg began telling investors he was in favour of less risky investment decisions.
Glencore Xstrata in May dumped plans to develop a coal export terminal on Balaclava Island in Australia, also blaming the decision on poor market conditions.
Reporting by James Regan; Editing by Muralikumar Anantharaman