china’s second prize vanadium?

http://www.miningnewspremium.net/StoryView.asp?StoryID=1027936

China’s second prize vanadium?
Tuesday, 9 June 2009


CHINA may have missed out on first prize, namely Rio Tinto, but the dragon is still casting its eye over plenty of smaller Australian projects that could feed its steel-making sector. The latest is Windimurra Vanadium. The Metal Detective, by Stephen Bell
There is no doubt that Rio’s snubbing of Chinalco in favour of rival BHP Billiton set back China’s global takeover agenda.

Getting a firm grip on Rio and its key Australian assets would have puffed up Team China, giving it confidence to swoop on other tier one mining assets across the globe.

But a recovery in commodity and debt markets, along with the pragmatism of new Rio chairman Jan du Plessis, spoiled the Chinalco party.

At one stage last week, it looked like China might receive a double dose of egg-on-face with reports that an investment syndicate, led by RBC and RFC Capital Markets, put an alternative offer to OZ Minerals.

But it seems that OZ’s management has snubbed the offer and will go ahead with a shareholder vote on Thursday to approve the China Minmetals deal.

Barring any last minute surprises at the meeting, OZ is not a bad second prize for the Chinese.

China hasn’t exactly been barred from Australian mining, as some might gather from reading the reams of stories about Chinalco and Rio.

OZ, with its portfolio of zinc, copper and nickel assets, adds to an already chunky list of recent Chinese investments, including Fortescue Metals Group, Perilya, Grange Resources, Midwest Corp, Gindalbie Metals and Mount Gibson.

There is talk of further Chinese involvement in FMG to help it expand production.

And don’t forget the direct, non-public company forays such as Citic Pacific’s $4.6 billion Sino Iron venture under construction in the Pilbara.

There are no signs – yet – that the dragon is slowing down its shopping spree.

This is good news for the creditors of collapsed metals hopeful Windimurra Vanadium.

The company’s namesake mine, which is 90% finished after a $240 million construction phase, will soon be crawled over by interested parties, including some from China.

To say the asset has a colourful past is an understatement.

The original mine closed in 2003 and was partially scrapped by Xstrata.

Windimurra Vanadium – previously Precious Metals Australia – sold its 49% stake to the Swiss major.

But after a legal battle the junior regained control and started a redevelopment phase just a few months before the market went pear-shaped.

In February Korda Mentha partner Brian McMaster was appointed joint receiver of Windimurra Vanadium by a Merrill Lynch-led syndicate owed around $US120 million.

After casting the net wide via an information memorandum, the receivers are now sifting through dozens of responses.

The receivers are trimming the tyre kickers into a shorter list of 10-12 “serious” bidders, who are likely to be flown to site later this month, a well-placed source told theMetal Detective.

The majority of interest has come from overseas, and at least one Chinese party is expected to be on a plane to Windimurra, in the Mid West region.

At this stage there are a variety of proposals, including recapitalisation and some that would involve outright purchase.

The interest has come from mining companies, vanadium end-users, marketing companies and financial ventures.

Hong Kong-based commodities trader Noble Group, which has 10% of the mine and marketing rights, is thought to have expressed some interest.

Windimurra had aimed to produce 5700 tonnes per year of ferro-vanadium, which is used to strengthen steel.

It would be no surprise if a few steel makers lodge offers.

Aside from China, Germany might be in the running as ThyssenKrupp has been sniffing around WA vanadium assets for some years.

At one stage the German steel maker had an offtake deal over Aurox’s Balla Balla venture.

Macquarie Capital Advisers is assisting Korda Mentha in the sale process for Windimurra.

While vanadium is attracting interest, straight iron ore assets are obviously still firmly on the radar for offshore steel mills.

Atlas Iron’s magnetite assets in the Pilbara may well be of interest to China, which has shown a willingness to invest in the lower-grade form of iron ore.

Also in the Pilbara is Aquila Resources, which is carrying out a feasibility study on its West Pilbara joint venture, a 650 million tonne channel iron deposit.

The project aims to ship a total of 30Mt a year out of Anketell Point, and has received interest from Chinese and South Korean steel mills.

There are also a couple of WA companies running African ventures that are up for grabs.

Perth-based Sphere Resources, for one, is using UBS to coordinate the sale of a strategic 51% stake in its $US2.2 billion Guelb el Aouj project, which aims to ship 7Mtpa of direct reduction pellets from an existing deep-water port in Mauritania.

Despite tough market circumstances, Sphere has apparently received significant interest from global mining companies, along with Chinese and European steel groups.

Indicative bids are due before the end of the month, with binding offers due in the third quarter.

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