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Chinese under the radar with $7bn of Pilbara investment
News: 15-November-07 by Mark Pownall


As the titans of Pilbara iron ore flirt with each other, Andrew Forrest makes his dreams a reality, and the minnows of sector fight over control of the Mid West’s resources, it’s little wonder that almost $7 billion of new investment plans have gone almost without notice.

In the western Pilbara, two projects are gathering steam near the Fortescue River, just 20km or so from Cape Preston – with ambitious plans to mine magnetite ore.

The biggest of these, the CITIC Pacific Ltd-controlled Cape Preston Iron Ore Project, has all but fired the starter’s gun on its $4.66 billion (US4.2bn) development.

Last week the group committed an additional $220 million to extend its holdings, on top of $585 million it has already spent gaining a foothold in the area.

That transaction, with Clive Palmer’s Mineralogy Pty Ltd as vendor, was triggered by the identification of an additional one billion tonnes of ore via an extensive drilling program undertaken by the Chinese group.

With about two billion tonnes now recognised under its control, Perth-based CP Mining Management Pty Ltd is set to formally launch its project this month, with Larry Yung Chi Kin, the high-profile head of its Hong Kong parent, CITIC Pacific, coming to town for the event.

While CP Mining was seeking to keep things low-key last week, its neighbour in the region, listed Perth explorer Australasian Resources Ltd, was having none of that.

Australasian announced the CITIC Pacific transaction to the market probably because it is keen to draw attention to its own $2.33 billion plans, which are being pulled along in the wake of its bigger neighbour.

Mineralogy has carved up the Cape Preston leases into a series of different project areas, like a property developer might organise a real estate subdivision.

CITIC Pacific, a steel producer in China, is already progressing one part, the Sino Iron Project, and last week’s purchase of Korean Steel Pty Ltd extended its control of a second part, known as the Balmoral project. That latter site is adjacent and north of Australasian’s Balmoral South development, which it estimates has one billion tonnes of ore.

“CITIC’s decision emphasises the quality of the Balmoral projects at Cape Preston,” Australasian managing director Andrew Caruso told the market in an announcement to the stock exchange.

“It underpins our belief that the area will become a world-class iron ore province in coming years.”

Backed by Chinese steelmaker Shougang Corporation, Australasian’s plans are similar, if not smaller, than those of CP Mining.

Australasian hopes to have a bankable feasibility study finished by March, allowing for construction of a 12 million-tonnes-per-annum mine, concentration and pelletising plant, conveyor and port by 2010.

That is about a year behind CP Mining, which wants to have the capacity to produce 27mtpa of concentrate operating by 2009, with a 450MW power plant, 51 gigalitre desalination plant, a slurry to the coast where the product will be barged out to carriers. A six million-tonnes-per-annum pellet plant will also be built on the coast.

It’s understood that the two would-be iron ore miners have talked to each other about where they can work together, given the proximity of their mines, the location of the port and the timing of their projects.

Australasian, for instance, is thought to be seeking to use CP Mining’s construction camp as its project immediately follows the planned progress of its neighbour.

Whether or not that kind of arrangement would extend to the construction labour force is not known.

CP Mining already has 200 people, mainly in Perth, and expects to have as many as 2,500 at the peak of construction, before settling back to an operational workforce of 600.

Australasian expects to need about 2,000 at its peak, so the synergies are obvious, especially when workers are scarce.

CP Mining plans to launch a national recruitment campaign early next year, and has already had to deal with claims that they were planning a fly-in fly-out Chinese workforce.

Like Australasian, CP Mining says it will need to rely on its Chinese steel expertise for the magnetite processing, which will require some specialists to come here.

But it has claimed this will ultimately result in up-skilling its Australian workforce.