Iron ore prices climbed to a one-week high on Monday after Rio Tinto (NYSE, LSE, ASX: RIO) suspended operations at its Simandou project in Guinea when an incident killed a contract worker.
The most-traded January iron ore contract on China’s Dalian Commodity Exchange (DCE) closed daytime trading 2.3% higher at 787 yuan (US$110.06) per tonne, its highest level since Aug. 14. On the Singapore Exchange, benchmark September iron ore rose 2.7% to $103.30 per tonne early Monday, also the highest since Aug. 14.
Rio Tinto, the world’s largest iron ore producer, is paying more than half of Simandou’s $11.6-billion capital cost. The mine’s full capacity is expected to deliver nearly 120 million tonnes of high-quality iron ore annually, making it one of the largest new sources of supply globally. The company had previously expected its first iron ore shipment from the project in November.
“All activity at the SimFer mine site is currently suspended, and support is in place for colleagues affected by this event,” the company said.
Simon Trott, who assumed the role of Rio Tinto’s CEO on Monday, is expected to visit the site. He confirmed the company will launch an investigation.
Seventh death
Rio holds two of the four Simandou mining blocks through its SimFer joint venture with China’s Chalco Iron Ore Holdings and the Guinean government. Rio is also partnering with Aluminum Corp. of China.
The fatality highlights ongoing safety challenges for Rio. This marks the seventh death at its operations in the past two years. Last October, a contractor was killed at the SimFer port site, and in January of the same year, four employees died in a charter flight crash en route to the Diavik diamond mine in northern Canada. Before these incidents, Rio had recorded five consecutive years without fatalities at its managed operations.
Meanwhile, near-term demand for iron ore remained firm despite production restrictions in China’s top steelmaking hub, Tangshan, imposed to ensure cleaner air in Beijing ahead of a military parade marking the end of World War Two. Average daily hot metal output – a key gauge of iron ore demand – held steady at 2.41 million tonnes in the week ending August 21, according to consultancy Mysteel.
Market sentiment was further supported after Shanghai announced it would ease home-buying restrictions for eligible families.
Shares of Rio Tinto rose 2.4% on Monday in Australia, giving the company a market capitalization of A$164 billion (US$106 billion).
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