China Cash Goes After Untapped Pilbara Ore

China cash goes after untapped Pilbara ore

Perth ABC News

22nd March 2007

China has underlined its desperate hunt for future supplies to feed its insatiable steel industry, pledging financial clout to develop two of the Pilbara’s biggest untapped deposits of steelmaking materials.

Yesterday China’s Shougang Steel and its Hong Kong offshoot, APAC Resources, already key backers of Mt Gibson Iron, agreed to pump almost $100 million into Perth junior Australasian Resources and finance its $US2.1 billion ($2.6 billion) Balmoral South magnetite project at Cape Preston.

At the same time, Perth junior Aurox Resources revealed that a “major diversified resources company” was eyeing a “strategic position” in the company and its big Balla Balla iron/vanadium project near Whim Creek.

Aurox refused to identify the party, but it is understood to be a major Chinese corporation — most likely Beijing giant Sinosteel — keen on taking a controlling stake in a $500 million magnetite and vanadium development at Balla Balla.

The news comes amid an unprecedented wave of foreign investment in WA’s booming resources sector as Chinese groups vie for a slice of the State’s vast mineral reserves.

Australasian’s deal with Shougang comes just two months after the junior company acquired the Balmoral South resource from Queensland mining baron Clive Palmer, now its biggest shareholder with 76 per cent.

The resource is part of a multi-billion tonne magnetite deposit controlled by Mr Palmer and is already being developed by China-backed Citic Pacific. Citic last year paid Mr Palmer $290 million for the right to mine one billion tonnes of magnetite at the site and is now building a $2 billion mine, pellet plant and port.

Australasian managing director Darren Hedley said yesterday’s deal highlighted the importance of the Balmoral South project to Chinese steelmakers. “China has done years of work on this project and this is the second time now that Chinese companies have put substantial money into this asset,” he said.

Shougang and APAC will jointly pay $56 million at $1 a share for an initial 12.8 per cent stake in Australasian. They will also receive 28 million $1.50 options that will raise a further $42 million when exercised over the next three years. Australasian will use the money to complete its $15 million bankable feasibility study into a magnetite operation producing five million tonnes of magnetite concentrate, five million tonnes of magnetite pellets and 1.5 million tonnes of hot briquetted iron annually from 2010. Shougang will acquire a 50 per cent stake in the venture by providing an interest-free loan to fund construction, repayable from operating profits, and will buy all output for 25 years.

Aurox managing director Charles Schauss said he was confident the partner would invest in Balla Balla after a “detailed five-week review”.

Already the world’s biggest vanadium resource, it is also rich in titanium and iron from which Aurox initially aims to produce three million tonnes of magnetite concentrate a year.

The news sent Aurox shares surging 13.5¢ to 95.5¢. Australasian shares have been suspended since December.