sinosteel

This was an interesting art in the West Aus today traders should watch junior Iron Ore miners especially Cape Lambert Iron Ore (CFE)

China puts up $3b to secure iron ore

JOHN PHACEAS


Chinese industrial giant Sinosteel Corporation has offered aspiring Australian iron ore miners access to a $3 billion war chest for new overseas mining ventures as China seeks to escape the domination of iron ore heavyweights BHP Billiton, Rio Tinto and Brazil's CVRD.

The offer comes as Chinese steel makers continue to hold out against another almost certain big increase in iron ore prices this year, warning that miners were putting at risk their long-term relationships with what is now the world's biggest ore importer.

It also comes as Sinosteel-backed junior Midwest Corporation loads the first shipment from its new Koolanooka hematite mine, east of Geraldton, for delivery to the Chinese conglomerate early next month.

Speaking at the annual AJM Iron and Steel conference in Perth, Sinosteel Australia managing director Xiaofei Cui said China was eager to identify and control new supplies of key raw materials in a market dominated by the world's leading miners.

Sinosteel, which represents 18 major steel mills and last year traded more than 20 million tonnes of iron ore, expected to maintain a leading role in that process, he said.

To that end, Mr Cui issued an open invitation to Australia's mining hopefuls to approach Sinosteel first if they were looking for an international development partner.

"As the messenger of Sinosteel Australia, I'd like to explore more opportunities in Australia," he told the conference. "So if you have any ideas or opportunities, I'd be happy to discuss business." Speaking to reporters, Mr Cui said Sinosteel had already secured two major bank facilities giving it a $3 billion war chest to help fund new mining ventures in countries such as Australia.

"Last year, Sinosteel made a lot of preparations for new investment," he said, referring to the two facilities. "One is for $US1 billion ($1.35 billion) and the other is 10 billion RMB ($1.7 billion) for overseas investment."

Mr Cui said just how much of that money was invested in Australia would depend on the quality of opportunities brought to the group.

"That's up to the projects in discussion. Aside from Australia we are having discussions in other places like Brazil," he said. Sinosteel is already a leading Chinese investor in Australia's iron ore industry, thanks to its landmark 1990 deal to become a 40 per cent partner in Rio Tinto's Channar iron ore mine in the Pilbara. Mr Cui said talks were under way to extend the agreement to cover other resources on the Channar leases.

But Sinosteel has also broken new ground as a backer of new producers.

Aside from becoming a foundation customer of Koolanooka, Sinosteel last year became a 50:50 partner in Midwest's proposed $1.5 billion Weld Range iron ore and Koolanooka magnetite ventures.

It has also held preliminary talks with Cape Lambert Iron and Andrew Forrest's Fortescue Metals Group over their respective projects in the Pilbara.

Commenting on iron ore prices, Mr Cui warned that pushing for another big increase after last year's 71.5 per cent rise was not in miners' long-term interest.

While Sinosteel believes prices should fall 5 to 10 per cent this year, analysts are predicting increases of 15 to 20 per cent based on strong world demand and the lag in bringing on new mine supplies.

Mr Cui said that although China's steel industry was a big producer, it was not a strong one, and was already struggling to cope with current prices.