Giving the keynote address at the Global Iron Ore & Steel Forecast Conference in Perth this morning, Goncalves described the seaborne iron ore market as a “free-for-all”
 
“Let’s assume that iron ore prices, that are now at $US57, they go to $30 – it’s possible right? You’re going to have Australia going out of business as a country because this is the most important commodity for the country,” he told media on the sidelines of the event.
 
“When prices were still in the $80s, the prime minister [Premier Colin Barnett] of WA was already complaining, and at $58, he should be starting to climb the walls.”
 
“Like everything that’s good or bad, this madness in iron ore will come to an end.”
 
Goncalves warned the big miners to think about the ramifications of their actions.
 
“If iron ore continues to deteriorate, the history of Australia as a country will be changed, so we need to think about these consequences,” he said.
 
According to Goncalves, the tonnes pumped into the market by BHP, Rio and Vale over the past 13 months had destroyed $50 billion in EBITDA.
 
“It’s a zero sum game that nobody wins,” he said.
 
But Goncalves said the government shouldn’t intervene, rather, the companies’ shareholders should revolt.
 
He used what happened at Cliffs last year as an example, when the former management were kicked out after spending like “drunken sailors”
 
“My predecessors, the ones that I took down in a hostile takeover in July of 2014, were trying to create a new Rio Tinto,” he said.
 
“Had we not done what we’ve done in the past six months, Cliffs would not have another three years, despite the fact the company had 167 years behind it. The shareholders spoke at Cliffs.”
 
The strategy under Goncalves is to exit the seaborne trade altogether, which includes the sale of Cliffs’ Koolyanobbing mine in Western Australia.
 
Goncalves said there was a lot of interest in the asset.
 
“We have a life of mine of, give or take, five years, and we know at depressed prices how much EBITDA we’re going to make, we know the net present value and as long as we receive a payment that is more or less equivalent to the NPV, we’ll sell,” he said.
 
He said the work done at Koolyanobbing had ensured its costs remained “in the same ballpark as the majors”
 
He admitted the Australian dollar was a “big help”, contributing to $4 per tonne of reductions in the last quarter.
 
“So do I take advantage? Yes. Do I feel like we deserve to do that? No, but what can I do about it?” Goncalves said.
 
He took another swipe at the Reserve Bank of Australia for pushing the currency down and driving the Chinese out of the market, saying it would be “a difficult point if the RBA had to defend in the WTO”
 
“We are not against free trade, we are just against unfair trade,” Goncalves said.
 
“We are against muscling out countries, pushing countries out of business.
 
“Think if it were Russia trying to drive the Japanese out of business or something, it would not be that good, so in a world that’s flat, you’ve got to do to others only what you accept for someone else to do to you.”