Definitly growing interest in the sector...and BRM well placed......
Chinese mills seek long-term offtake agreements in WA
Sarah-Jane Tasker | January 13, 2009 (Edited) Article from: The Australian
EMERGING West Australian iron ore producers are facing renewed Chinese interest in long-term offtake agreements before an expected drop in contract prices.
Hartleys resource analyst Andrew Muir said Chinese steel mills were still looking for long-term offtake agreements, but he warned that companies would now be more selective.
"Obviously there have been juniors around who have been proving up resources, and with the expected fall in the iron ore price, steel mills will be looking for a cheap deal," he said.
"Over the past two years attention has been drawn to the sector and investors were happy to fund exploration efforts to prove up new resources, but in future it will be harder to raise money.
"Each company will now be looked at on its merits, and money will not just be thrown at anything involved in iron ore."
Offtake agreements are usually negotiated long before construction of a facility begins.
There were reports yesterday that Chinese steel mills would demand a 40 per cent cut in the contract price of iron ore, but analysts said this was likely to be a starting point for negotiations, and a reduction of only 30 per cent was anticipated.
"The Chinese are keen to secure ownership of deposits in WA for the long term and are offering lots of things for a piece of the company."
Pilbara hopeful Iron Ore Holdings, in its response to a price query, yesterday told the Australian Securities Exchange that renewed interest in the sector could be behind a recent share spike.
"The company notes that in the last week there would appear to have been a renewed interest in numerous companies in the iron ore sector generally," Iron Ore Holdings said.
CCZ Equities Research analyst John Chong said juniors that had secured funding before the credit markets flat-lined were in a better position than those now desperate to raise cash to complete projects.
"We have seen some life emerging in the smaller stocks," he said.
BRM Price at posting:
90.0¢ Sentiment: Buy Disclosure: Held
