shougang fund $2.7b wa mine

Australasian confident Shougang will fund $2.7b mine

8th December 2008, 11:30 WST


Australasian Resources, seeking to build a $2.7 billion ($1.8 billion) iron ore project, is confident partner Shougang will secure financing next year as funding for resource developments dries up.

Talks are progressing and they have been quite productive, Andrew Caruso, chief executive officer of the Perth- based company, said today in an interview in Melbourne after meeting Chinas ninth-largest steelmaker in Sydney on the weekend. Shougang have shown signs of commitment to the project and that gives us the necessary confidence.

The worst credit crisis since the Great Depression has curbed lending and increased borrowing costs, slowing development of as much as $193 billion in mining projects, according to Credit Suisse Group AG. Steel mills in Asia, Europe and North America have slashed output as the financial crisis curbs demand, forcing producers to cut iron ore production.

The first half of 2009 will be difficult for the iron ore market as demand slumps though the first signs of recovery should be seen in the second half of next year, Caruso said

Australasian, controlled by Australian iron ore billionaire Clive Palmer, rose 4.5 per cent to 35 cents at 12.01pm. Sydney time on the Australian stock exchange. The stock has dropped 74 per cent since June 30 and has a market value of $155 million.

Shougang will be entitled to all output from the proposed Balmoral South mine and pellet plant provided funding is completed by March 31, Caruso said. Shougang is seeking to boost output of steel to as much as 30 million metric tons a year from about 11 million tons this year, he said.

Balmoral South, in Western Australias Pilbara region, is slated to begin annual output of 12 million tons of iron ore concentrate and pellets in 2011, Caruso said.