Heads roll as BC Iron forced to cut costs amid weakest price in years
Australian miner BC Iron (ASX:BCI) said Wednesday it was reducing its board size from eight to five as it steps up plans to reduce costs amid historic iron ore prices slump.
The measure affects the company’s first managing director Mike Young, who was boss at BC Iron from its market listing in 2006 through to 2013. Malcolm McComas and Peter Wilshaw have also stepped down from the board, the miner said.
“The resignations reflect recent board discussions to reduce its size in the current iron ore price environment," the company added.
BC iron also said that the board decided to reduce the fees of the remaining non-executive directors, effective January 1.
Seaborne prices dipped down $70 per tonne this week, the lowest in the last five years, extending its retreat today as global supplies of the steel-making raw material are poised to swell just as economic growth in China is slowing.
The commodity has lost 49% of its value since March, when it dropped into a bear market in March as output climbed. Most Australian producers, except for BHP Billiton (ASX:BHP), Rio Tinto (LON:RIO) and possibly Fortescue Metals (ASX:FMG), are not making a margin.
BC Iron chief executive Morgan Ball had previously said that $71 was the lowest possible price at which the company remain profitable, provided it cut costs.
Experts predict that the situation won’t improve much next year. Some global miners such as Rio Tinto (LON:RIO) have said they will ramp up supply by roughly 10%, mostly in the first half of next year, based on Citigroup estimates. This, more than worries about demand, has the futures market predicting that iron ore will be down another 5%, CME Group data shows.
Former Rio Tinto boss Tom Albanese shares the pessimistic outlook. In an interview with Australia Financial Review he said Wednesday that the commodity was likely to remain at the new low prices for longer than originally forecast.
He added that the market has changed since it abandoned the benchmark pricing system in 2010 and added that “volatility is the new normal.”
Image courtesy of BC Iron