Rio Tinto also announced an extension of its joint venture with Sinosteel Corporation in Western Australia, designed to allow for a further 50 million tonnes of iron ore to be produced in the Pilbara region.
Tailings are rendered inert and any arsenic in the ore is said to be 100% fixed.
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What about the Bre-X scandal of 1997--when promises of a mountain of gold in Borneo turned out to be a few ore samples salted with gold dust?
"In things like iron ore, there must be competition concerns - maybe as a combined group, they would have to dispose of something, " he added.
This is expected to be driven mainly by cost savings in Indonesia where higher grade ore and economies of scale will bring down costs by nearly 50%.
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To please officials in the city of Haicheng, close to Xiyang Village, Mr Zhou abandoned a plan to build a steel factory in the southern port of Beihai, where there would be ready access to ore shipped from Australia.
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The two firms' mines will supply iron ore in equal volumes to the ships of both companies, to be delivered to their respective customers.
They need to be loaded as fast as possible with the precise ore blend ordered by the customer in Shandong, and they need to leave on the next tide.
Any meaningful pick-up in demand should be supportive since supply remains constrained due to factors such as labor disruptions, declining ore grades and limited new major discoveries.
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The combined company will be named Cliffs Natural Resources, and own nine iron ore facilities and more than 60 coal mines in North and South America and Australia.
There was also concern that Europe's competition authorities might balk at a deal which would put the combined entity in control of roughly 40% of the world's international trade in iron ore, and force it to sell some assets at a time when it would be difficult to get a good price.
Toronto's Northland Power wants to convert an old open-pit iron ore mine in Ontario into a waterfall five times the height of Niagara Falls, which could be used to generate power.
Analysts at ICAP Shipping Research in London shrug off the idea that there will be a glut, since shipments of cheap Australian coal and iron ore to China have for years been constrained by a lack of big ships.
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