the west

Chinese make move for Cape Lambert

26th March 2007, 10:30 WST


China’s insatiable appetite for West Australian iron ore is showing no signs of letting up, with Pilbara magnetite hopeful Cape Lambert Iron poised to become the latest start-up to secure Beijing’s backing to get a new generation operation off the ground.



After calling a trading halt on Friday while “commercial negotiations” with an unnamed third party were continuing, Cape Lambert told the London Stock Exchange it was negotiating a deal that “may or may not lead to a part disposal of the company’s iron ore project”.

It is believed that giant Beijingbased conglomerate Sinosteel is seeking a formal offtake and equity deal that will deliver it all output from Cape Lambert’s namesake project near Wickham as well as a controlling equity stake in the $500 millionplus venture.

It is understood that Cape Lambert chief executive Tony Sage flew to Beijing on Friday, in the hope of finalising a deal at the weekend.

Several international parties have expressed strong interest in Cape Lambert’s 2.5 billion tonne magnetite venture over the past 18 months, including Indian steel group Essar and Chinese companies Xingxing Iron Pipes, Shandong Yuansheng International Trading Co, Fujian San’an Group and Citic Pacific.

But Sinosteel has long been the favourite to lock in a formal deal after signing a non-binding heads of agreement with Cape Lambert in March last year.

Under that agreement, Sinosteel was seeking an offtake deal for most of Cape Lambert’s proposed output of five to 10 million tonnes of magnetite concentrate a year as well as a direct stake of at least 50 per cent in the project itself. Sinosteel’s interest appeared to have cooled by late last year, but it is understood to have since undertaken several new visits to the site after learning it may be gazumped by other parties.

Already the major partner in Gindalbie Metals’ $1 billion-plus Karara magnetite project in the Mid-West, Sinosteel has been an aggressive bidder for other steel-related projects in recent months, and is also believed to be in the running for a controlling stake in Aurox Resources’ proposed $500 million Balla Balla iron and vanadium project near Whim Creek.

Aurox last week confirmed it was negotiating with a major diversified resources company, understood to be a Chinese conglomerate, to partner it in the stage one development of a three million-tonnes-a-year magnetite concentrate operation at Balla Balla.

Cape Lambert’s imminent deal in Beijing comes just days after fellow Pilbara start-up Australasian Resources struck a multi-billion-dollar deal with Chinese steel giant Shougang to develop its huge Balmoral South magnetite project near Cape Preston.

The project is on leases adjoining the $2 billion Cape Preston magnetite project already being developed by Citic Pacific — the Beijing-backed Hong Kong conglomerate run by mainland billionaire Larry Yung.

Shougang and Hong Kong affiliate APAC Resources, already the biggest shareholders in WA miner Mt Gibson Iron, agreed to pump up to $98 million directly into Australasian to underpin development studies on the Balmoral South resource.

If the study is successful, Shougang will provide an interest-free loan to develop the $US2.1 billion ($2.6 billion) project in return for a 50 per cent stake, and will buy all magnetite concentrate, pellets and hot briquetted iron produced by the venture for at least 25 years.

Balmoral and Balmoral South are part of a magnetite deposit controlled by Queensland entrepreneur Clive Palmer. Last year he sold the rights to one billion tonnes of ore to Citic Pacific for $290 million, and backed Balmoral South into Australasian.

JOHN PHACEAS