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CITIC Pacific inks US$1b Australia foray

Friday, January 26, 2007

CITIC Pacific (0267) said Thursday it has signed a US$1.12 billion (HK$8.74 billion) contract with a Chinese construction company to develop an iron ore mine in Australia.
CITIC, a property and steel conglomerate, said China Metallurgical Group is expected to complete all the work in stages in about three years from the execution of the contract. The first shipment of iron ore will be ready in early 2009.

Metallurgical will be responsible for the procurement of mining equipment, design, construction, installation and testing of the infrastructure at the mining area, CITIC said.

State-owned Metallurgical has undertaken similar construction works for large-scale iron ore projects in countries including China, Brazil, Iran and Venezuela, CITIC said.

CITIC, a Hong Kong-listed blue chip with most of its operations in the mainland, acquired two firms in Australia in March, which own the mining rights to extract one billion tonnes of magnetite ore in Western Australia, for US$415 million.

If sufficient resources in the mining areas are proven, CITIC will have the option to acquire the mining rights to extract an additional four billion tonnes of magnetite ore.

The company is still in talks to sell 500 million tonnes of iron ore to a mainland partner as part of a precondition laid down by the Chinese government, managing director Henry Fan said.

"Discussion is still ongoing," Fan said. "Our priority in the last several months has been operational, including setting up a team and selecting contractors."

Along with the declining broader market Thursday, shares of CITIC ended 1.6 percent down to HK$28.25.

China's iron ore imports in 2006 were at 326.3 million tonnes, up 19 percent on year, the General Administration of Customs said Thursday. The country is one of the biggest importers of iron ore in the world, sourcing most of its supplies from Australia, Brazil and India.