New CITIC deal in Pilbara's $3bn Balmoral province Email Printer friendly version Normal font Large font November 6, 2007
Advertisement Hong Kong-based conglomerate CITIC Pacific has inked a deal to acquire Korean Steel, which holds the rights to develop a 1 billion tonne magnetite iron ore project in the Pilbara region of Western Australia.
The agreement is with cashed-up entrepreneur Clive Palmer and his private company Mineralogy. Korean Steel is a wholly owned subsidiary of Mineralogy.
The project is being acquired for more than $US200 million ($A217.39 million) plus continuing royalty payments to Mineralogy.
It is CITIC's second deal with Mineralogy. It follows an agreement in March last year to acquire the right to mine up to 6 billion tonnes of magnetite iron ore at Mineralogy's large Balmoral deposit in WA.
Professor Palmer is the largest shareholder in Australasian Resources which is developing the adjacent, 12 million tonnes-a-year Balmoral South project.
In a statement, Australasian said Professor Palmer had extracted a net present value of more than $3 billion in the past 12 months through the two transactions with CITIC.
Under the latest deal, CITIC will develop a port at Cape Preston, about 100 kilometres south of Dampier, which Australasian will have access to on a capital and operating shared-cost basis.
Australasian managing director Andrew Caruso said CITIC's decision emphasised the quality of the Balmoral projects. "It underpins our belief that the area will become a world-class iron ore province," he said.
If Australasian's ally, Shougang Corporation, elected to proceed with the Balmoral South project next year, up to 36 million tonnes a year of iron ore would be shipped from the new port, Mr Caruso said.
State-owned Shougang, China's fourth-largest steel maker, is providing all the project funding, estimated to be $US2.1 billion ($A2.28 billion), through an interest-free loan.
In yesterday's South China Morning Post, Shougang Concord deputy managing director Michael Chen Zhouping was quoted as saying the company was conducting a feasibility study and if the results were positive, it could take a 50 per cent stake in the project and sign an agreement to buy all the iron ore produced.
Shares in Australasian closed 6¢ higher at $1.58 yesterday.
ARH Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
