Last night's announcement means steel-makers value Qcoal at 2.8Billion! Prod will start in 2012 which is after RIV is scheduled to begin selling coal. Japanese, korean and now Indian and brazilian steel-makers are willing to invest HUGE dollars in c.coal and IO producers in an effort to avoid being hostage to price increases from the big 3-4 dominant producers in each of these commodities. Will China try to buy a 20% stake in RIV?? I don't rule anything out when a worldclass deposit of this magnitude sits undervalued. Something will give... soonish i hope. dyor MM.
By: Reuters 17th December 2009
TOKYO - JFE Holdings, the world's No.6 steelmaker, said it would invest $560 million in an Australian coal mine, in a move to counter global mining giants' tightening grip over prices of key steel-making materials. Japan's steelmakers are increasingly finding themselves in a difficult position in talks over coal and iron ore prices with global titans like BHP Billiton, Rio Tinto and Vale following the emergence of China and India as big rival buyers of such raw materials.
"It's a positive step for a Japanese steelmaker," said Yuji Matsumoto, a steel analyst at Nomura Securities.
"I expect other Japanese companies to follow. Japanese makers need to develop ways to respond to the growing negotiating power of mining giants."
JFE said it would invest 50-billion yen ($560-million) for a 20 percent stake in the Byerwen coal mine in Queensland owned by QCoal Pty Ltd, including plant and machinery.
The investment will give JFE the right to buy 2-million tons of coking coal a year for at least 10 years, after the mine starts operating in 2012. It will have a peak annual output of 10 million tonnes a year.
It will be JFE's biggest investment in natural resources since it spent the same amount on a 16 percent stake in the Namisa iron ore mine in Brazil in October 2008.
Shares of JFE closed up 2.3 percent at 3,520 yen, outperforming the iron and steel subindex's 1,5 percent gain.
KEEN ON OWN MINES
JFE said the investment in the Byerwen coal mine would boost the ratio of coal it buys from its own mines to 15 percent after 2012, up from the current 10 percent.
"We plan to boost the ratio to 30 percent as soon as possible in view of tightening demand for coking coal," Akira Suzuki, executive assistant general manager at JFE Steel, a core unit of JFE Holdings Inc, told a news conference.
He added that JFE also plans to increase investments in iron ore mines.
The top three miners, Rio, BHP and Vale, have a large influence on prices as they dominate the market in seaborne iron ore, with a share of about 70 percent and control most of the production not owned by steelmakers.
BHP Billiton Mitsubishi Alliance, a joint venture between BHP Billiton and Mitsubishi Corp, in Australia accounts for 70 percent of coking coal shipments bound for Japan.
BHP and Rio's plan to develop their iron ore assets in Western Australia as a joint venture has sparked fierce opposition from global steelmakers. They are concerned the move will lessen competition in an industry that is already highly concentrated.
Together with South Korea-based POSCO, Japan's top five steelmakers last year bought a 40 percent stake in the Namisa iron ore mine in Brazil for $3,12-billion.
RIV Price at posting:
$6.82 Sentiment: LT Buy Disclosure: Held
