Lock and load people......Everything lining up perfectly for ARH and they are ready to fire!! Expect news on Mineraoogy deal within weeks....
Thanks Citic for building a port and infrastructure for us!
Citic begins big WA iron ore push Date: July 3 2006
A HONG KONG conglomerate run by Chinese billionaire Larry Yung will on Thursday spend $US215 million ($A290 million) to kick-start China's biggest ever direct investment in Australia's iron ore industry.
The deal will also launch Western Australia's first magnetite mine and pellet venture.
Coming as China desperately seeks direct control of foreign ore supplies to counter surging prices, Citic Pacific's investment will pave the way for the $US1.37 billion stage one development of Clive Palmer's big Fortescue magnetite project at Cape Preston in the Pilbara.
Mr Yung is the eldest son of former Chinese vice-premier Rong Yiren. Citic Pacific, an $8.6 billion listed investment house, is 29 per cent owned by China's biggest overseas trading group, and owns China's biggest producer of specialty steel.
Under a deal struck with Mr Palmer's Mineralogy group in March, Citic Pacific secured the rights to mine up to 6 billion tonnes of magnetite at Cape Preston, subject to an upfront payment of $US215 million for the first billion tonnes.
The Foreign Investment Review Board approved the deal last Thursday, and managing director Henry Fan said Citic Pacific would pay the $US215 million this week.
"Completion is scheduled for this coming Thursday, when payment will be made," Mr Fan said.
Citic Pacific executives would be travelling to Australia to mark the occasion, he said, while a team of experts from China would also be arriving shortly to start "exploratory work" on the massive venture.
Mr Fan said the investment represented a "win-win for both Mr Palmer and Citic, as well as both our economies".
"It is also great news for China, with an acute shortage of ore to meet its growth," he said.
Mr Palmer said the deal was potentially worth up to $7 billion, including royalties to Mineralogy of up to $600 million a year once all 6 billion tonnes were under development.
In addition to its initial payment, Citic Pacific will develop a 7 million tonnes a year magnetite mine and pellet plant at Cape Preston costing $US1.37 billion.
It must also pay $US200 million by July 2008 to secure its second billion tonnes of ore and develop a second plant costing $US1.1 billion.
It also has options to acquire another 4 billion tonnes in $US200 million tranches thereafter.
Mr Palmer said work could start almost immediately.
"They should be able to start construction this year, and I think what they'll be doing is bringing on one project a year for six years," he said. The first plant would take three years to complete, suggesting production will start in 2010.
Cape Preston is one of several start-up iron ore and magnetite ventures in WA to win the backing of Asian steel makers in their bid to secure independent ore supplies.
In the state's mid-west alone, Anshan Steel is backing Gindalbie Metals' proposed $1 billion Karara project east of Geraldton, Sinosteel is a partner in Midwest Corporation's planned Koolanooka and Weld Range projects, while Shougang Steel has taken control of the $750 million Extension Hill magnetite project.
ARH Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
