"Starting to build folks"Chinese steel kingpin listens in...

"Starting to build folks"


Chinese steel kingpin listens in ore
Kevin Andrusiak
June 04, 2007

FEW would have recognised that tucked away in Friday's extraordinary general meeting for shareholders of Australasian Resources was one of the biggest players in China's steel industry.
Cao Zhong, assistant president of Shougang Group, China's fourth biggest steelmaker, was there to oversee just how the millions invested by his company were being used by the aspiring magnetite heavyweight and its $2.5 billion Balmoral project.

Shareholders at the EGM easily passed the two motions that approved interests associated with Shougang picking up 56 million shares and 28 million options for $56 million as part of Shougang's financing commitments for Balmoral.

Balmoral is part of a new breed of magnetite projects, which typically have ore of lower quality than their hematite cousins, but are quickly becoming part of the mix to feed ravenous Chinese steel mills desperate to keep pace with demand.

Other developing magnetite projects include Andrew Forrest's Fortescue Metals project in the Chichester Ranges and Tony Sage's Cape Lambert development, also in the West Australian Pilbara.

Mr Cao said Shougang had no problems signing long-term contracts for magnetite. Chinese steel mills had been using it for decades as part of their production mix because it was virtually all that domestic miners could get their hands on.

Shougang can earn a 50 per cent interest in Balmoral provided it comes up with an interest-free loan during construction of the project, including all infrastructure, which is expected to top $2.5 billion.

Balmoral has a 1.1 billion tonne reserve - indicated and inferred - with an average iron grading of 31.3 per cent.

Australasian is predicting its iron ore concentrate will grade between 68 and 71 per cent iron.

"Demand for iron ore (magnetite) will remain, considering the economic situation in China," Mr Cao said through an interpreter.

"The iron ore concentrate needs a grade of 60 per cent iron. In China some of the ore mined is around 15 to 16 per cent."

Mr Cao predicted there would be no easing in iron ore price rises for at least another two to three years, despite increased global production, of which most will be magnetite-based.

"In the short term, no, the prices will continue to rise," he said.

"As long as the new projects have good conditions and make economic sense, Shougang will be interested."