mcc

Port boost on $400m deal



Chinese swoop on Cape Lambert’s iron ore project puts Cape Preston on shipping map


PETER KLINGER



Cape Preston’s emergence as the Pilbara iron ore industry’s fourth principal port is set to receive a $400 million boost as early as today when Cape Lambert Iron confirms plans to sell its flagship magnetite project to a Chinese Government-controlled group.
The deal, flagged in WestBusiness on Saturday, is expected to deliver China Metallurgical Group Corporation, (MCC), a majority stake (possibly as much as 100 per cent) in Cape Lambert’s namesake project, which contains a 1.6 billion tonnes resource.
The deal will be MCC’s second venture in the Pilbara. It also owns 20 per cent of Citic Pacific’s $5.2 billion Sino Iron project at Cape Preston, which involves the construction of a mine, pelletiser plant and port.
MCC is likely to axe Cape Lambert’s original plan for a stand-alone port facility in favour of transporting magnetite from its new project to Cape Preston, possibly via a 100km slurry pipeline.
Such a move could significantly boost Cape Preston port’s forecast export volumes from a mooted 36 million tonnes a year and guarantee its standing as a major player on the Rio Tinto and BHP Billiton-dominated Pilbara iron ore port landscape.
Officials of Perth-based Cape Lambert refused to comment and MCC could not be contacted. Cape Lambert’s shares have been in a trading halt since Friday.
The deal could leave Cape Lambert as a listed cash box with up to $400 million at its disposal, enough to pounce on other miners struggling to meet their financial obligations amid the global credit crunch.
The deal with MCC underpins China’s desperation to gain control over parts of WA’s world-class iron ore province to offset the soaring price of the key steel ingredient.
China’s steel groups have become increasingly aggressive in acquiring stakes in emerging WA iron ore players, including the Clive Palmercontrolled Australasian Resources which plans to use Citic’s Cape Preston port.
Australasian’s Chinese shareholders include APAC Resources, which is also on Mt Gibson Iron’s register, as well as Shougang, whose attempts to acquire a 19.7 per cent stake in Mt Gibson are the focus of a Takeovers Panel investigation.
The MCC deal with Cape Lambert, which is expected to require Foreign Investment Review Board approval, comes as Rio and BHP try to force Asia’s steel mills to accept a 70-plus per cent rise in 2008 benchmark iron ore prices. Such a rise would be substantially above the 65 per cent headline figure agreed to last week between Brazilian iron ore miner Vale and its steel mill customers.
Pilbara’s iron ore industry is dominated by higher-grade hematite ore, which both Rio and BHP are mining and exporting. A third player, Andrew Forrest’s Fortescue Metals Group, is hoping to wave off its maiden hematite shipment from Port Hedland in May.
But the MCC deal with Cape Lambert will further underscore the value China’s steel industry sees in the lower-grade magnetite ore, which can be upgraded through costly beneficiation or blended with hematite.