30/04/2008 - 22:00

New Sinosteel bid a sign of the times

30/04/2008 - 22:00


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Sinosteel makes the decision to increase its takeover offer for West Perth company, Midwest Corporation Ltd.

New Sinosteel bid a sign of the times

China’s determination to become a major player in Australia’s iron ore industry has been highlighted by Sinosteel’s decision this week to increase its takeover offer for West Perth company, Midwest Corporation Ltd.

The increased offer has won the backing of Midwest’s directors and is likely to pave the way for another Sinosteel backed company, Yilgarn Infrastructure Ltd, to lodge a bid for the $2 billion Oakajee deepwater port.

Yilgarn will be competing for the project against Oakajee Port and Rail, which is backed by rival mining company Murchison Metals Ltd and its Japanese joint venture partner Mitsubishi Corporation.

Sinosteel’s interest in the Mid West region does not stop there. Murchison Metals announced this week that the Chinese steelmaker had acquired a 2.4 per cent interest, sparking speculation about Sinosteel’s intentions.

Midwest’s recommendation of Sinosteel’s increased takeover offer marks an 11th hour turnaround from its previous trenchant criticism of Sinosteel. The offer is pitched at $6.38 per share, subject to Sinosteel receiving acceptances of 50.1 per cent, and values Midwest at $1.4 billion.

The valuation primarily reflects the potential output from future iron ore mines which are dependant on the Oakajee port and associated railways being built at a total cost of $3 billion.

Yilgarn chairman John Saunders welcomed the Midwest recommendation and said he was confident Yilgarn will be able to submit a superior proposal.

Murchison managing director Trevor Matthews said the turnaround by Midwest’s board over Sinosteel’s offer could be seen as a good thing for the Mid West region.

“In an overall regional context it’s got to be positive,” Mr Matthews said “You’re getting companies investing significant amounts of capital just to basically have an equity stake in either companies like Midwest or joint ventures or projects.

“And to get value out of those investments they’ve got to see the development of a new port and rail infrastructure, otherwise these companies won’t be able to expand and get their iron ore to market.”

Sinosteel was the first Chinese company to invest in WA’s iron ore sector, when it bought a 40 per cent stake in Rio Tinto’s Channar mine in 1987.

In the Mid West, Ansteel made its second payment to Gindalbie Metals Ltd of $55 million of an overall $1.8 billion funding arrangement over the Karara iron ore project. 

Perth-based Apollo Minerals Ltd announced this week an unnamed Chinese iron and steel group has proposed to increase its stake from 12 per cent to 19.9 per cent. 

Other investments in the sector by Chinese companies also include the $400 million sale of Cape Lambert Iron’s namesake project to China Metallurgical Group Corporation.

Chinese giant CITIC Pacific has decided to take matters into its own hands and is currently developing its Sino Iron project in the Pilbara region.


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