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Australasian going places

Colin Jacoby
Thursday, 22 March 2007

PERTH-based iron ore explorer Australasian Resources hopes to be catapulted to the top of the emerging iron ore players' ladder after signing a funding deal with one of China's leading steelmakers, Shougang Corporation, for the development of its Balmoral South iron ore project in Western Australia's Pilbara region.



Australasian Resources managing director Darren Hedley


Australasian Resources managing director Darren Hedley overseeing drilling at the Balmoral Southern Block magnetite deposit in the Pilbara


Drilling at Australasian Resources Blamoral Southern Block magnetite deposit in the Pilbara

Australasian shares, which have been locked in a trading halt since December 14, are set to resume trading on the Australian bourse after the company yesterday said Shougang entities would invest $A56 million into Australasian through a share and option subscription agreement, with attaching options to raise a further $42 million on exercise.

Chinese state-owned Shougang will also provide total funding for the Balmoral South project, estimated at $US2.1 billion ($A2.6 billion) and will purchase all of the iron ore products from the project.

Shougang will hold a 12.8% stake in Australasian after subscribing for 56 million Australasian shares at $1.

Australasian managing director Darren Hedley said the placement had been made as part of a strategic alliance between the Shougang group and Australasian.

"There is a clear business case why this match has every reason to be very lucrative for all parties," he said.

"When a company with the reputation, iron ore know-how and asset backing as Shougang has, injects $56 million into the company, including an option for a further $42 million at a premium price, it sends a clear message to the investing public that this asset and the company is going places."

Australasian's Balmoral South project comprises rights to mine 1 billion tonnes of magnetite iron ore from part of the Susan Palmer deposit within the larger Balmoral deposits.

The current proposed development plan involves the production and export of 5 million tonnes per annum of iron ore concentrate, 5Mtpa of iron ore pellets and approximately 1.5Mtpa of hot briquetted iron.

The company has already delineated a mineral resource at Balmoral in excess of 1.1Bt and announced a JORC-compliant 346Mt ore reserve estimate.

Shougang entities will also have the right to appoint two members to the board of Australasian's subsidiary International Minerals while Australasian will appoint four members to the board.

Shougang, through its entities, imports over 20Mt of iron ore into China for use in their steelmaking facilities.

The Chinese steelmaker is currently in the process of developing a substantial new integrated steelmaking facility on a site at Tangshan on the northern coast of China with production of 10Mt of steel a year commencing 2010.

Last year, Australasian announced a deal with Clive Palmer's Mineralogy over the Balmoral South magnetite project, which delivered Palmer around 80% of Australasia's issued capital.