Chinese-Russian deal puts twist on Cape Lambert ore1st August...

Chinese-Russian deal puts twist on Cape Lambert ore
1st August 2008, 7:30 WST

The battle for control of Cape Lambert Iron Ore’s flagship magnetite deposit in the Pilbara took a bizarre twist last night when its proposed Chinese acquirer sold a majority of the project to rival bidder Evraz — even before settlement had occurred.

China Metallurgical Group Corp (MCC) was due to settle on the $400 million acquisition of Cape Lambert’s project yesterday afternoon. Settlement would have triggered a $240 million downpayment.

However, Cape Lambert is understood to still be waiting for the payment, or at least an update from MCC on what prompted the unscheduled delay.

Undeterred by the fact it does not yet own the project, MCC yesterday stunned observers with news it had struck a deal to offer 75 per cent of the deposit to Russian steel giant Evraz, which until Monday had harboured ambitions of launching a takeover bid for Cape Lambert with the aim of snaring outright control of the 1.6 billion-tonne resource.

It is understood that Evraz and MCC had worked on the deal for a fortnight, in parallel to Evraz’s takeover considerations.

Under their “co-operation” agreement to jointly develop the resource, Evraz will own 75 per cent of the project and MCC 25 per cent. However, MCC will be entitled to up to 60 per cent of the iron ore production, while the entire output will be shipped to China.

Cape Lambert is understood to have been caught unawares by the MCC-Evraz deal, which will create the first significant Sino-Russian joint venture in WA. Chinese and Russian companies are renowned for being prickly joint venture participants and observers said they would watch with interest to see how the Cape Lambert co-operation deal unfolded.

Evraz will need Foreign Investment Review Board approval.

Evraz is understood to need about 12 million tonnes of magnetite a year to feed the demands of Delong Holdings, the Singaporean steel group it is about to take control of. Although the deal with MCC will not provide the entire supply, it will secure a big slice of Delong’s needs.

The first step to be taken by the joint venture partners is a bankable feasibility study before a decision on whether the high-cost project makes economic sense. The project was originally targeting a 15mtpa life but may be cranked up to 20mtpa.

PETER KLINGER