Ann: MXR: First Non-Core Asset Sale - Canegrass P, page-39

re: Ann: MXR: First Non-Core Asset Sale - Can... Hi William,

Many people think that magnetite is an inferior resource. I used to think like that too but at $100 a tonne maybe it's not so bad after all!

Below is an article from The Age Business Day published a few days ago.

China deal to heal wounds of iron ore hopefuls
Garimpeiro / Barry FitzGerald
May 4, 2009

Despite the iron ore dive and Government security jitters, China is undeterred.

WATCH out for Bob Duffin's iron ore hopeful Western Plains Resources to come out of its trading halt today after securing a joint venture deal with China's Wuhan Iron and Steel on its Hawks Nest magnetite project in South Australia with a major Chinese steel group.

It is believed that Wuhan is to spend big to earn a 50 per cent equity in Hawks Nest, and to take a $3 million placement of WPG shares (15 per cent).

It's all welcome news for WPG, which previously traded at 28¢ a share for a market capitalisation of $26 million. But it also has some wider ramifications for the iron ore hopefuls that, like WPG, were riding high with their iron ore ambitions before the global financial crisis hit in September.

It demonstrates that despite the retreat in iron ore prices, China's steel industry is looking across the current valley of gloom to secure long-term supplies while it can.

The Chinese know that sooner or later, the 70 million tonnes of stockpiles sitting in Chinese ports will be gone and that long-term supply deals at supportive prices will come back in vogue.

WPG's deal will feed in to the national debate on Chinese investment in the resources sector, as well as potentially providing a template for future foreign investment in the Woomera Protected Area (WPA) — a 20 per cent chunk of SA controlled by the Defence Department.

Hawks Nest sits within the WPA, as does OZ Minerals' Prominent Hill copper-gold mine. OZ was recently forced to exclude Prominent Hill from its deal with China's Minmetals to secure Federal Government clearance for its rescue package.

So the old Woomera rocket range is a sensitive chunk of ground, even if the region's pastoralists are known to enjoy the occasional weapons testing "fireworks" from deck chairs.

The inclusion of a restriction on WPG's new partner from ever owning more than 50 per cent of the joint venture is expected. As is a condition that WPG can never be removed as the manager of the joint venture. WPG will be hoping that will placate Canberra and the Defence Department.

It will also be hoping that the entry of a big-spending Chinese partner into the Hawks Nest project will be enough to persuade the SA Government to crack the whip on the development of Port Bonython as a bulk export port.

Given that Hawks Nest is shaping up as a 30-year project of 10 million tonnes of magnetite concentrate annually, you would think there is incentive enough to get cracking on the $500 million port development.

After all, at current prices for magnetite of about $A100 a tonne, we're talking about a $1 billion annual export industry. As good as SA wines are, its wine industry doesn't get close to those figures.

Cheers,
John