Hanlong may partner with SOEs in MbalamGlobal Times | 2012-12-28...

Hanlong may partner with SOEs in Mbalam
Global Times | 2012-12-28 0:44:06
By Fang Yunyu
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Private firm Sichuan Hanlong Co is considering a partnership with State-owned enterprises (SOEs) to develop a major iron ore mine in western Africa, urged on by Chinese authorities, Hanlong told the Global Times Thursday.

"On a request from relevant government agencies, several large State-owned steel companies are talking with Hanlong about a cooperation to jointly develop the Mbalam iron ore mine," according to a statement e-mailed by Hanlong Thursday.

The firm noted that the deal is "particularly" aiming to provide reliable long-term iron ore resources for domestic steel companies.

The Mbalam project, owned by Australian iron firm Sundance Resources in Cameroon and the Republic of the Congo, is valued at as much as $14 billion, and is expected to reach an annual output of 35 million metric tons of steel-making raw material in phase one, eventually growing to 100 million metric tons in phase two.

According to Hanlong, the phase one mining plan will cost more than $5 billion. However, the Chinese private conglomerate, with a wide portfolio including resource mining, pharmaceuticals and real estate, is still in the process of taking over Sundance.

Sundance disclosed on December 13 that Hanlong had postponed the long-delayed $1.4 billion acquisition deal because China Development Bank, which had previously agreed to provide up to $1.02 billion in funding, requested further information.

"Teaming up with fund-efficient SOEs can help provide financial support to Hanlong," Wang Guoqing, a researcher at Lange Steel Information Research Center, told the Global Times Thursday, noting that Chinese banks will be more willing to provide financial assistance to Hanlong if it sets up a partnership with SOEs.

Moreover, Wang said, establishing partnerships with SOEs can help reduce risk for the project, considering the many problems that may arise for Chinese companies in overseas resource mining, including infrastructure bottlenecks, political issues, and workers strikes, because otherwise, Hanlong would be totally on its own.

Several Chinese companies have encountered difficulties in operating overseas mining projects in recent years due to such issues.

The State-owned Metallurgical Corporation of China Ltd earlier this month decided to shelve its $3 billion iron ore project in Australia due to rising costs.

Media reports said in October that Hong Kong-based CITIC Pacific Ltd did not even start production at its two mines in Australia after investing enormously in them since 2006

But an insider from the steel industry told the Global Times on condition of anonymity that as long as China's economy continues to grow, iron ore, viewed as a strategic asset, will be needed for the country's development.

Companies trying to develop overseas mines will have big business opportunities in the future, the insider said.

Statistics from China Iron and Steel Association shows that China this year relied on imports to meet about 60 percent of its demand for iron ore.


http://www.globaltimes.cn/content/752761.shtml