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RPT-Q&A-China backs growing Australian iron ore sector Reuters - Friday, October 2Send IM Story Print
SYDNEY, Oct 1 - Growing magnetite iron ore projects in Australia are being targeted for development by Chinese firms bent on reducing reliance on the giant hematite deposits mined by Rio Tinto and BHP Billiton.

Baosteel Iron & Steel Co <600019.S>, Anshan Iron & Steel Group <0347.HK>, Sinosteel, Citi Pacific Mining <0267.HK>, China Metallurgical Corp and others are backing projects that industry majors have largely ignored because they contain magnetite ores.

Magnetite ore is used to produce almost half the world's steel but in Australia magnetite accounts for less than 4 percent of overall production.

Here are some questions and answers about Chinese investment in the sector:

* WHAT'S THE DIFFERENCE BETWEEN HEMATITE AND MAGNETITE?

Hematite is often referred to as "direct shipping ore" or "DSO" because it is mined and beneficiated via a simple crushing and screening process before export for use as feed in steel mills.

Magnetite ore has lower iron content and must be upgraded at a cost to make it suitable for steel making. Traditionally there has been minimal seaborne trade and steel mills are often constructed adjacent to magnetite mines.

* WHY ARE CHINESE COMPANIES INVESTING IN AUSTRALIAN MAGNETITE PROJECTS?

China already uses magnetite ore to produce much of its steel and is well-versed in building and operating magnetite processing facilities.

* WHAT DO THE CHINESE EXPECT TO GAIN BY INVESTING IN AUSTRALIAN MAGNETITE MINES?

There are more than 20 identified magnetite deposits and prospects in Australia. State by state, this amounts to an estimated 4.7 billion tonnes of magnetite resources in Western Australia, 1.6 billion tonnes in South Australia and 700 million tonnes each in Tasmania and Queensland.

* ARE ANY AUSTRALIAN MAGNETITE PROJECTS WITH CHINESE OWNERHIP OPERATING?

One. The Savage River project operated by Grange Resources, 47.1 percent owned by Chinese steelmaker Shagang, yields 2.3 million tonnes annually. Grange is developing a second project forecast to supply 6.6 million tonnes annually.

* ARE ANY PROJECTS WITH CHINESE INVESTMENT CLOSE TO PRODUCTION?

Two. Citic Pacific Mining plans to export the first shipload of iron from its Sino Iron project by the end of next year, rapidly working up to 27 million tonnes per year.

Construction of a 450 megawatt power station is underway and port facilities are expected to be finished by the end of this year. A dedicated shipping fleet is also being assembled to transport the product to steel mills in China owned by Citic Pacific and other companies.

Ansteel's 36.28 percent-owned Gindalbie Metals Ltd GBG.AX> expects to start production from its Karara mine at an annualised rate of 8 million tonnes in late 2010.