sorry if this has been posted, thought it was of some interest...

sorry if this has been posted, thought it was of some interest to ARH holders
cheers notthemama


China stokes iron ore fever

24th March 2007, 10:45 WST


The Pilbara iron ore boom is snowballing as Chinese demand continues to grow, with BHP Billiton approving another $2.6 billion expansion of its WA mines and major deals looming for Fortescue Metals Group and magnetite hopeful Cape Lambert Iron.



BHP Billiton yesterday committed to its long-awaited Rapid Growth Project 4 (RGP4) that will increase its Pilbara iron ore exports from 129 million tonnes to 155 million tonnes a year. The extra production will start coming on stream in 2010 and hit full capacity by 2012.

BHP Billiton’s share of the cost will be $2.2 billion, with the rest to be picked up by its long-standing Japanese partners Mitsui and Itochu.

The company is also now evaluating a further expansion, which iron ore chief Ian Ashby said could double BHP Billiton’s Pilbara output again to 300 million tonnes

The latest commitment continues an unprecedented period of expansion in the Pilbara.

Rio is also midway through a $US3 billion ($3.75 billion) rolling expansion of its Pilbara business to lift its WA iron ore capacity to 220 million tonnes by 2009, roughly double its capacity in 2003.

At the same time, Andrew Forrest’s Fortescue Metals is racing to complete its 45 million tonnes-a-year Pilbara operation by the middle of next year, and is keen to expand to 110 million tonnes early next decade.

Fortescue further fuelled rumours of an imminent deal yesterday by calling a trading halt ahead of an announcement on Monday.

The halt comes after it confirmed on Thursday that negotiations with unnamed parties could lead to a material agreement if concluded.

Though Fortescue is expected to sign another incremental offtake deal with Chinese buyers next week, analysts yesterday said that alone was unlikely to warrant a trading halt.

But Daiwa Securities analyst Mark Pervan said Fortescue might be negotiating new contracts sufficient for an accelerated expansion program.

Industry sources have also suggested Russian and Chinese steel interests may be again eyeing a strategic interest in the company after missing out on a cornerstone stake last year.

It was also suggested that Fortescue might be negotiating a new equity injection to counter delays and cost blow-outs at its $3.7 billion Pilbara iron ore project in the wake of cyclone George.

Fortescue executive director Graeme Rowley declined to comment when asked if Fortescue now needed to raise fresh equity.

“We haven’t done enough work to know exactly what the delay is costing us,” he said. “The big issue is going to be accommodation and getting people on the ground again. Obviously we’ve got some ideas about how to try and do that.”

Fortescue yesterday conceded that progress on its railway had been “disappointing” even before the cyclone struck on March 10, partly due to “accommodation constraints” and a twoday strike over health and safety issues. While the railway is facing lengthy delays, it said work at its Cloud Break mine should return to full capacity within three weeks.

Meanwhile, Cape Lambert Iron is believed to be on the verge of securing a major Chinese group, most likely Sinosteel, as a partner in its namesake $1 billion magnetite project.

The company yesterday called a trading halt after a query over a 25 per cent surge in its share price to 46.5¢ and said “commercial negotiations with a third party are continuing”.

The iron ore boom has been driven by China’s insatiable appetite for steel making materials.

In a recent market briefing, Rio Tinto estimated China had been responsible for 74 per cent of growth in the world’s crude steel production between 2000 and 2006. China lifted production by nearly 300 million tonnes of steel in that period.

JOHN PHACEAS

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