Lower prices are set to stay for iron ore in the short-, medium- and long-term. The sharp fall in price seen of late has no direct bearing on how we arrive at our long-run forecasts, however, there are indirect impacts to fundamentals from today's conditions that provide the basis for our upside and downside price potential.

Executive summary 1

Chapter 1 Introduction 9

ChapteR 2 Demand 11

1. Steel consumption 12

      1.1 Forecasting methodology 12

      1.2 China: further to go 13

      1.3 The sleeping giants of India, South East Asia and Africa 24

      1.4 Global Summary 26

2. Steel trade and production 27

3. Iron production and raw materials demand 28

      3.1 Steel-making technology in China 29

      3.2 Steel-making technology in India 30

4. Metallic charge mix 30

5. Iron ore mix 31

      5.1 Iron ore mix in hot metal production 31

      5.2 Iron ore mix in DRI/HBI production 32

6. Iron ore demand 32

Chapter 3 Supply and Gap Analysis 35

1. Potential production 36

      1.1 Australia 36

      1.2 Brazil 44

      1.3 North America 51

      1.3.1 United States 51

      1.3.2 Canada 54

      1.3.3 Summary 58

      1.4 Rest of Americas 59

      1.4.1 Chile 59

      1.4.2 Peru 60

      1.4.3 Venezuela 61

      1.4.4 Uruguay 61

      1.4.5 Mexico 62

      1.4.6 Summary 62

      1.5 Europe and the CIS 63

      1.5.1 Europe 63

      1.5.2 CIS 65

      1.5.3 Summary 67

      1.6 Africa 68

      1.6.1 South Africa 68

      1.6.2 Other Africa 70

      1.6.3 Summary 74

      1.7 India 75

      1.8 Rest of the World 86

      1.8.1 Summary 86

2. Gap analysis 88

      2.1 Methodology 88

      2.2 Analysis of gap model 109

3. Key investment issues 122

      3.1 Conventional wisdom 122

      3.2 New locations and risk 122

      3.3 Capital costs and infrastructure 126

      3.4 The magnetite issue 127

Chapter 4 Prices 129

1. Current situation and short-term outlook 130

2. Long-run marginal cost 133

3. Price forecast 141

      3.1 Base price 141

      3.2 Upside and downside potential to the base price 148

      3.3 Non-benchmark price forecasts 150

      3.4 Pellet and Lump Premia 151

      3.5 Price Forecasts Summary 155

      3.6 Conclusions 156

Appendix A

The compass forecasting methodology 157

      1. Long-term and short-term forecasting 157

      2. Overview of the Compass methodology 159

      2.1 Demand module 160

      2.2 The supply data base and gap analysis 162

      3. Long run marginal cost model 165

      4. Price model 168

Appendix B

CRU's iron ore value in use model 169

      1. Valuing different iron ores 169

      2. Value in use components 170

      2.1 Base price 170

      2.2 Iron content and value in use 171

      2.3 Penalties for impurities 171

      2.4 Product form premia 172

      2.5 Energy values 172

      3. Other factors determining value 172

Appendix C

Chinese agglomeration technology 173

Appendix D

Long run marginal costs methodology 179

Appendix E

India 183

Appendix F

Simandou, one step forward 197

Appendix G

Mine project profiles 201

      1. Introduction 201

      2. Financial assessment of project potential 201

      3. Individual Project Profiles Methodology 206

      3.1 General Information 206

      3.2 Annual Production Rates 206

      3.3 Mining, Processing and Transport Details 206

      3.4 Ownership 206

      3.5 Product Specifications 207

      3.6 Indicative Value 207

      3.7 Mineral Resources and Ore Reserves 207

      3.8 Value Based Costing 207

      3.9 Port Details 207

      3.10 Capital Requirements 207

      3.11 Development 208

      3.12 Background Description 208

      4. Project Profiles 209

      McPhee Creek Atlas Iron Australia 209

      Cashmere Cashmere Iron Australia 210

      Commonwealth Hill Apollo Minerals Australia 211

      Marillana Brockman Australia 212

      Parker Range Cazaly Australia 213

      Pilbara Iron Ore Project Flinders Mines Australia 214

      Roy Hill Phase 1 Hancock Prospecting Australia 215

      West Pilbara Iron Ore Project Baosteel Australia 216

      Wiluna West Golden West Resources Australia 217

      Casa de Pedra CSN Brazil 218

      Grey stone Zamin Ferrous Brazil 219

      Minas Rio Phase 1 Anglo Ferrous Brazil Brazil 220

      Northern System Vale Brazil 221

      P4P Samarco Brazil 222

      Pau de Vinho MMX Brazil 223

      Pedra do Ferro Bahia Mineracao Brazil 224

      Planalto Piaui Bemisa Brazil 225

      Serra Azul MMX Brazil Brazil 226

      Vargem Grande Itabiritos Vale Brazil 227

      Viga expansion Ferrous Resources Ltd Brazil 228

      Hopes Advance Oceanic Iron Ore Canada 229

      LabMag & KeMag Tata Steel/New Millenium Canada 230

      Lac Otelnuk Adriana Resources Canada 231

      Mary River ArcelorMittal Canada 232

      Cerro Negro Norte CMP Chile 233

      Shymanivske and Zelenivske Black Iron Inc. Ukraine 234

      Valentines project Zamin Ferrous Uruguay 235

      Kalia Phase 1 Bellzone Republic of Guinea 236

      Mayoko - Moussondji Equatorial Resources Republic of Congo 237

      Mayoko 1 Exxaro Republic of Congo 238

      Mbalam Project Phase 1 Sundance Resources Cameroon 239

      Nkout Afferro Cameroon 240

      Simandou Rio Tinto Republic of Guinea 241

      Tonkolili Phase 2 African Minerals Sierra Leone 242

      Askaf Glencore Xstrata Mauritania 243

Statistical Review 244

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