CHINESE small and medium-sized steel mills are "desperate" to forge offtake agreements and equity stakes with Australian iron ore companies, including Brockman Resources, to secure raw materials for planned expansions, according to the iron ore developer's managing director.
"I can categorically say yes, we have had Chinese steelmakers wanting equity stakes and joint ventures," Wayne Richards told a Rising Resources Stars luncheon yesterday.
"Smaller, privately owned mills are desperate to build their expansions."
Brockman, which is busy developing the 1.1 billion tonne Marillana iron ore project in Western Australia's Pilbara, has signed seven confidentiality agreements with Chinese steelmakers but is in no rush to speed up the process.
The recent completion of a $113million equity raising would provide enough funding for Brockman's initial 2 million tonne operation, due for commissioning late next year, Mr Richards said.
This would generate cash flow to help fund its larger Stage 2 project for 10-25 million tonnes of iron ore from 2013.
"Stage two could be either a joint venture or we could do it alone," Mr Richards said. Capital costs for the larger development were put at between $540million and $744 million, depending on the eventual size of the project and outcome of negotiations with BHP Billiton and Rio Tinto for use of their rail and port facilities.
Analysts do not expect a repeat of this year's massive price rise for iron ore, instead forecasting a 10-20 per cent rise.
Earlier this month, iron ore hopefuls in the Pilbara keen to take advantage of China's ongoing voracious appetite moved a step closer to gaining access to railways owned by BHP and Rio Tinto.
In a draft ruling, the National Competition Council recommended that third parties should have a legally enforceable right to negotiate access to the railways.
Brockman's Marillana is within a 50km radius of both BHP and Rio's rail lines.
BRM Price at posting:
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