01 November 2015
by Peter Ker

US miner Cliffs Natural Resources links iron exports to China's advance in South China Sea

US miner Cliffs has linked Australian iron ore exports to China's moves on the Spratly Islands in the South China Sea.

US miner Cliffs Natural Resources has escalated its critique of Australian iron ore miners, accusing them of supplying China with the materials to launch its territorial advances into the South China Sea.

In another emotive attack on iron ore exporters such as Rio Tinto and BHP Billiton, Cliffs chairman and chief executive, Lourenco Goncalves, said the miners were supplying China "to become an enemy"

I believe that China is a disaster. I believe that China will bring Australia down. Lourenco Goncalves, Cliffs Natural Resources

"I hope the Australians will continue to question themselves why one or two companies are giving their finite resource away to the Chinese while the Chinese builds into a military powerhouse in the South China Sea," he said in a conference call with analysts on Friday.

Cliffs chairman and chief executive, Lourenco Goncalves, said Australian miners were supplying China 'to become an enemy".

"I believe that China is a disaster. I believe that China will bring Australia down.

"Australia is a member of the TPP (Trans-Pacific Partnership Agreement), so it is a friend, at the same time that they supply China to become an enemy. So (they've) got to pick a side.

'Myopic approach'

Iron ore prices fell below $US50 a tonne this week.

"I think that Australia will only believe China is destroying Australia when they build an artificial island on the Great Barrier Reef that they can see from the shore . So it is a matter of a myopic approach to world geopolitics and economics."

Cleveland-based Cliffs has a marginal iron ore export business in WA and several iron ore and coal assets in North America, and Mr Goncalves has several times over the past year attacked the big miners for continuing to grow iron ore exports into a weak market.

Mr Goncalves vowed last year Cliffs would pull out of Australia in about five years when its WA iron ore asset reaches the end of its working life, and he declared that selling iron ore from US mines into the US steel sector was a better plan that continuing to supply China as its economy slowed.

"If we continue to deny that things are changing over there (in China) and if we continue to say that Rio Tinto and the Australians are doing everything right, we are going to have a revolving door of Australian prime ministers in the next several years," he said on Friday morning.

"The United States will survive, we are going to continue to be insulated."

Mr Goncalves joined with Fortescue chairman Andrew Forrest last year in unsuccessfully calling for a government inquiry into iron ore. Then-prime minister Tony Abbott initially indicated support for such an inquiry, before abandoning the idea.

"I believe that some smart people in Australia are trying to show Mr Abbott that he needed to do a real investigation to understand why prices are as low as they are," Mr Goncalves said. "Now he is no longer in charge. So there is another guy (prime minister) over there."

The Minerals Council of Australia fought against an inquiry into iron ore and has defended the continuing growth of iron ore exports. Chief executive Brendan Pearson dismissed Mr Goncalves's comments on Friday.

Claims 'nonsensical'
"These claims are nonsensical and incoherent. Fortunately, there is not the slightest prospect of his advice being taken seriously," he said.

There was no immediate comment from Foreign Affairs Minister Julie Bishop's office.

On the operational side, Mr Goncalves said Cliffs' Koolyanobbing iron ore business in WA had produced at a cash cost of $US26 a tonne in the three months ended September 30, down from $US34 a tonne in the June quarter and $US53 a tonne in the September quarter of 2014.

He said the cost-reduction efforts had kept the operation cash-flow positive during the September quarter, with Koolyanobbing delivering earnings before interest tax depreciation and amortisation of $US10 million for the quarter.

Iron ore was fetching $US49.65 a tonne on Friday.