Junior Australian ore miner inks deal with China's Sinosteel Posted: 21 March 2006 0931 hrs
SYDNEY : Junior Australian miner Cape Lambert Iron Ore announced a preliminary agreement with China's Sinosteel Corp in the latest move by Chinese steelmakers seeking to undercut the price-setting power of mining heavyweights BHP Billiton and Rio Tinto.
Cape Lambert said it had signed a non-binding memorandum of understanding (MOU) with Sinosteel for development of an iron ore project in the Pilbara region of Western Australia.
As part of the MOU, Sinosteel and Cape Lambert will negotiate a commercial agreement for the purchase by the Chinese firm of up to 100 percent of the project's output, expected to be 5.0-10 million tonnes a year.
The company said negotiations were continuing on joint venture obligations, product specifications, annual quantity, delivery schedules, pricing and payment terms. Sinosteel represents 18 major steel mills in China, which last year bought more than 20 million tonnes of iron ore.
The company has earmarked one billion US dollars for overseas investment as part of a strategy to diversify supply away from price-setters like BHP and Rio Tinto.
Cape Lambert Iron Ore said it was also negotiating with Chinese trading group Shandong Yuansheng International Trading, which is seeking an equity position in the company and a off-take agreement for up to 100 percent of the Pilbara project's output.
Cape Lambert said it intends to review all opportunities before selecting a partner or partners committed to the project's development.
Tuesday's announcement came a day after another Australian miner, Gindalbie Metals, said it was in discussions with China's fourth largest steel company, Anshan Iron and Steel Group, which wants to buy ore from a proposed project in Western Australia.
And Australia's Fortescue Metals Group said last week that it had signed 10-year sales contracts with six Chinese steel mills for ore from mines it hopes to develop in the Pilbara.
The spate of deals come after Beijing accused the big three iron ore suppliers - BHP Billiton, Rio Tinto and Brazil's Companhia Vale do Rio Doce - of engaging in monopolistic behaviour after they forced a massive 71.5 percent increase in the price of iron ore for the current fiscal year.
China's Ministry of Commerce issued a statement last week warning that China would not tolerate unreasonable prices for iron ore.
The warning came amid ongoing talks between leading iron ore suppliers and Japan's steel mills over contract prices for the year starting April 1.
BEIJING, March 22 -- Chinese trading group Sinosteel reached an iron ore supply deal with Australia¡¯s Cape Lambert Iron Ore Ltd. yesterday, the latest step by China to secure direct supply links with the world´s richest lode.
The agreement to supply ore from a proposed mine in far western Australia´s Pilbara iron ore belt could also lead to a joint venture with Sinosteel to develop the lode.
Chinese firms have been scrambling to secure future supplies of the key raw material to make steel from projects in Australia to help feed the country´s steel making industry and thwart efforts by independent mining companies to jack up prices.
As part of the latest pact, Sinosteel and Cape Lambert will look to negotiate a binding commercial agreement to purchase up to 100 percent of the output from the Cape Lambert iron ore project, which expected to be in the range of 5 to 10 million tons a year and pursue a joint venture partnership to help fund development of the project.
In the past week, China has said it would not accept a second year of big price increases in iron ore from its suppliers in Australia and elsewhere, though Chinese State media reported last Thursday that prices could rise between 5 and 10 percent from last year.
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