3 miners to benefit from an increase in iron ore demand

Chinese importing keeps spot prices up.

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In mid-2013, iron ore prices began climbing higher, giving the mining industry some welcome news. Prior to then iron ore and coal had been heading down in price, squeezing miners on both fronts.

Thermal coal hit a bottom in August, and has slightly recovered to a little over $88, but iron ore has gone up more. The major players BHP Billiton (ASX: BHP), Rio Tinto (ASX: RIO) and Fortescue Metals Group (ASX: FMG) are using this window of opportunity to earn more as they all are ramping up production.

Here's an update on three up and coming mining companies in WA that are following the big three.

Iron Ore Holdings (ASX: IOH) has just received a recommendation for approval of its Buckland iron ore project from the Environmental Protection Agency (EPA), as well as for its road haulage plan. The EPA has recommended that the mine venture be given the green light, subject to a number of standard conditions. Albert Jacob, the EPA minister, will have the final decision in the matter.

Already the company has received environmental approval for a small trans-shipping port development that is planned at Cape Preston East. The final feasibility studies for the mine project are expected to be complete in the first-quarter of next year.

Atlas Iron (ASX: AGO) released the findings of it Corunna Downs drilling results. It stated the area might be a prospective new iron ore province for North Pilbara. The site is west of the McPhee Creek project, which is also owned by Atlas Iron, and is within trucking distance of Port Hedland. This announcement follows the news that the company has contracted about 60% of its planned 2014 production out for sale. In the first-quarter of 2014 it shipped about 2.4 million tonnes of iron ore.

Mount Gibson Iron (ASX: MGX) has iron ore operations in the Kimberley as well as the mid-west area near Geraldton. It has just purchased the Shine Hematite deposit from Gindalbie Metals (ASX: GBG) for $15 million. It is located 250km away from Geraldton's port. The site has its feasibility study complete and the approvals process is well advanced.

"Building our hematite iron resource in the mid-west is a key priority for Mount Gibson and this represents a low-cost near-term development opportunity that fits perfectly with our strategy," Mount Gibson CEO Jim Beyer said. In 2013, the company sold a record 8.8 million tonnes and in first-quarter 2014 group ore sales increased to 2.6 million tonnes.

Foolish takeaway

The interest that the WA iron ore market is generating from higher iron ore prices is certainly welcome. On the east coast, coal mining companies are still belt tightening until coal prices rebound sufficiently. Although not on the same scale of BHP Billiton or Rio Tinto, Mount Gibson Iron and Atlas Iron can advance their own growth. Iron Ore Holdings can also benefit because the overall improvement in the iron ore mining sector will make its projects more attractive. It should also make it easier to source development funding once the mining lease is approved.

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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