I just extract from Bloomberg's article today (also re. from one of SDL thread today), and some information are relevant to your questions:
China to Speed Australian Iron Ore Investment After Rio Rebuff
By Jesse Riseborough
June 10 (Bloomberg) ……
“The opportunities for Chinese groups to come in and facilitate development of some of the smaller players is definitely going to start picking up pace,” said Eric Lilford, head of Australia mining at Deloitte Corporate Finance. Australia has A$26 billion ($21 billion) of proposed new iron ore mines, according to government estimates.
Rio last week scrapped a planned $19.5 billion deal with Aluminum Corp. of China, known as Chinalco, in favor of a share sale and iron ore venture with BHP Billiton Ltd., dashing Chinese expectations of locking in more supplies. Aurox Resources Ltd., Grange Resources Ltd. and Atlas Iron Ltd. may attract increased investment from China, according to Ord Minnett Ltd., an affiliate of JPMorgan Chase & Co.
“We won’t see this trend stopping or being deterred by Chinalco’s rejection because these companies are trying to get sustained supplies with stable prices,” said Zhou Xizeng, a Beijing-based analyst at Citic Securities Co. “Chinese companies have been successful in forming alliances with Australian junior miners.”
Monopoly Hints
The China Iron & Steel Association has rejected an agreement reached by Rio Tinto and Japanese and Korean mills for a 33 percent cut in annual contract prices, still at the second- highest level on record. The BHP-Rio venture “hints heavily of monopoly,” the Chinese group said in a statement yesterday.
China, the biggest buyer of iron ore, needs supplies to boost economic growth and the nation’s 4 trillion yuan ($585 billion) stimulus package has helped manufacturing expand, sparked record vehicle sales and boosted monthly imports of iron ore, copper and aluminum to records in April.
A total of 33 “less advanced” iron ore projects, with an estimated cost of A$26 billion, are planned, the Australian Bureau of Resources and Agricultural Economics said in a report last month.
Lower Grade
Many are lower-grade, magnetite ore projects including Aquila Resources Ltd.’s A$4.1 billion West Pilbara project and Atlas Iron’s A$3 billion Ridley project. Magnetite needs greater processing than higher-grade hematite ore, which accounts for about 96 percent of Australia’s output, according to Gindalbie Metals Ltd.
“The Chinese love magnetite so I’m sure they are going to push into the magnetite space big time,” Peter Arden, a resource analyst at Ord Minnett, said in an interview in Melbourne. “You are going to see at this stage multiple stakes being taken all over the place, to put their foot on it and keep others out.”
To be sure, China may also invest in projects outside of Australia, said Alan Heap, managing director of global commodities for Citigroup in Sydney. “There is high grade ore in West Africa, there is high grade ore in India,” he said.
Rio’s decision “aroused great repercussions among China’s enterprises and people,” Chinese foreign ministry’s spokesman Qin Gang said in an e-mailed statement yesterday. “However, we still believe China’s enterprises will continue” to carry out international investments and cooperation, he said.
The trend toward overseas investment “won’t be changed just because of one or two cases of failure,” said Li Kejie, a spokesman at Sinosteel Corp., China’s second-largest iron-ore trader, which last year acquired Australian producer Midwest Corp. for A$1.4 billion in cash.
SDL Price at posting:
17.5¢ Sentiment: Hold Disclosure: Held
