Shougang to develop Australian iron ore mine

Shougang to develop Australian iron ore mine

Shoudu Iron and Steel Group (Shougang) will provide an interest-free loan of AUD $56 million ($45.17 million) for Australasian Resources Ltd. (AR)'s Balmoral South iron ore project in the Pilbara region of Western Australia, according to an AR announcement on March 21.

Shougang plans to fully fund project construction, including all related infrastructure and guarantees to off-take all the premium iron ore during the project's 25-year lifespan. The loan will enable Shougang to acquire 56 million AR shares at AUD $1.00 ($0.81) per share, with 28 million free attaching options excisable at AUD $1.50 ($1.21) per share for three years after the loan is issued, according to AR.

Shougang will invest a further AUD $42 million ($33.88 million) in the form of project attaching-options in the next three years.

The project will produce and export 5 million tons of iron ore concentrate, 5 million tons of pellets and 1.5 million tons of hot briquette iron.

A Shougang Group official, surnamed Wu, declined to give further comment when reached by Interfax.

State-owned Shougang Group is the ninth-largest steelmaker in China and currently imports over 20 million tons of iron ore annually to supply its steel mills. At present, the group is attempting to secure overseas iron ore supplies in order to reduce raw material sourcing costs. Shougang abandoned the development of an iron ore deposit owned by Australia's Mount Gibson Iron Ltd. in December due to the high price of the deal.

Shougang's iron ore concentrate demand is increasing at a rapid rate, due to the development of a large integrated steel facility on Caofeidian Island, near the city of Tangshan in Hebei Province. Project construction formally commenced last week and Shougang expects the facility will produce 10 million tons of steel annually by 2010.

[All the above news stories are from Interfax China, 23 March 2007]