As China battles the seeming inevitability of a 19 per cent price hike in iron ore prices, the country’s largest iron ore importer is moving quietly to stitch up more long-term supply from Western Australia.
As China battles the seeming inevitability of a 19 per cent price hike in iron ore prices, the country’s largest iron ore importer is moving quietly to stitch up more long-term supply from Western Australia.
Sinosteel Corp, which buys for 18 of China’s major steel mills, has recently signed agreements with eastern Goldfields explorer Jupiter Mines Ltd and Pilbara aspirant Cape Lambert Iron Ore Ltd.
Sinosteel imports more than 80 million tonnes of iron ore a year from WA and has agreements in place with new producer Midwest Corp Ltd to take a 50 per cent stake in its $1.5 billion Weld Range project.
It also has 40 per cent of the Channar iron ore mine joint venture in the Pilbara struck with Rio Tinto subsidiary Hamersley Iron in 1990.
The company has also been talking to a number of other companies, including Grange Resources Ltd, over its $1.7 billion Southdown iron ore mine near Albany and Kemaman pellet plant in Malaysia, and with Golden West Resources Ltd over its 50mt to 200mt of high grade mineralisation at Wiluna West.
Sinosteel Australia managing director Xiaofei Cui has told WA Business News the company is open for business in WA.
An important element in Sinosteel’s expansion is its involvement in a consortium that includes the giant China Development Bank and the Export-Import Bank of China, which have provided the company with $3 billion to fund future investments.
Sinosteel’s latest deal is a memorandum of understanding (MOU) with Jupiter, giving it exclusive rights to negotiate joint venture terms on Jupiter’s high-grade Mt Mason hematite project, near Menzies, and Portman Mining’s Windarling and Koolyanobbing operations.
Jupiter has indicated it wants to establish a stand-alone operation that could involve ore being trucked to the railway at Menzies and then down to Esperance for shipment.
However, initial discussions are understood to have centred on an un-incorporated joint venture similar to that between Rio (60 per cent) and Sinosteel (40 per cent) over Channar, under which the Chinese would finance the project and take a controlling equity, with repayment for Jupiter’s part of the project set-up costs coming from cash flow.
Sinosteel recently signed an MOU with Cape Lambert for development and off-take from its namesake project in the Pilbara, between Karratha, Roebourne and Wickham.
The company’s first drilling program on the project is scheduled to begin next month to validate work by previous owner Robe River Mining Pty Ltd and a resource of 2.5 billion tonnes.
The agreement includes the purchase of up to all production, expected to reach between 5mt and 10mt/year from an as-yet-unspecified start-up time.
Midwest began shipping ore from its Koolanooka hematite project, 150kilometres east of Geraldton, to Sinosteel earlier this year.
But its main game is the joint development of its big Weld Range hematite project and Koolanooka magnetite concentrate/pellet project. The target is between 15mt and 20mt/year over 15 years from Weld Range and about 5mt/year of concentrates/pellets from Koolanooka by the end of the decade.
To get its 50 per cent of Weld Range, Sinosteel has to match Midwest’s development costs, then match future expenditure. At the conclusion of the pre-feasibility study, the project will be independently valued and Sinosteel will invest half that into the Weld Range project, effectively funding the project’s development and construction.
Sinosteel has also agreed to take half the product over the life of the mine, with an option to take the rest.
Other recent buyers to enter the WA iron ore market include major South Korean steel company POSCO Ltd, China’s second biggest steelmaker Anshan Iron and Steel, and its fourth largest, Shougang Group.
POSCO has taken a 4 per cent stake in Murchison Metals Ltd, whose stage-2 development at Jack Hills, 380km north east of Geraldton, is targeting 25mt/year from mid 2010, from which POSCO will take 10mt/year.
Anshan recently took a 50 per cent stake in Gindalbie Metals Ltd’s billion dollar Karara project in the Mid-West, expected begin production in mid 2007. Anshan has signed off-take agreements for its entire 10mt/year output.
Tallering Peak miner Mt Gibson Iron Ltd’s second stage involves the $715 million development of its 5mt/year Extension Hill mine, 280km south-east of Geraldton, with Shougang Group. However, both have agreed to extend an in-principle commitment decision until the end of this month.
Preliminary plans were to double production from 2009-10, following commissioning in late 2007.
