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Midwest deals with Sinosteel


Jesse Riseborough


Monday, June 20, 2005
SHARES in Perth-based iron ore explorer Midwest Corp retreated slightly this morning after last weeks big jump on the back of its agreement to establish a joint venture with leading Chinese State-owned trading house Sinosteel involving an off-take agreement and development of Midwest's two major iron ore projects in Western Australia.

The stock was off 4.5% in midday trade after rising 25% to 55c on Friday.

The agreement with Sinosteel covers the development of Midwest's Weld Range haematite project and Koolanooka magnetite project over three stages including a pre-study stage, involving a 'Co-operation Agreement' and establishment of a joint venture agreement, through to scoping, pre-feasibility and bankable feasibility studies. The two parties have until September 30 to complete the first stage of the deal and establish the joint venture.

Once these stages have been satisfied the parties will progress to an operational stage involving development of the two projects, both located within close proximity to the Port of Geraldton in Western Australia.

As part of the deal Sinosteel will also reimburse Midwest on a 50:50 basis for expenditure to date in development of the two projects, with all future expenditure on a 50:50 basis. Development of both the Weld Range and Koolanooka projects will be financed by limited recourse project finance with Sinosteel leading the procurement of additional finance.

The Koolanooka magnetite project will involve the export of concentrates and iron pellets and is based on an indicated magnetite ore resource of 430 million tonnes with current production projections based on 4.5Mt per annum for 20 years.

Midwest said its Weld Range haematite iron ore project had the potential to produce 15-20Mtpa from a current resource base of 132.1Mt. The company said the overall resource of the project could be as much as 400-500Mt given the current resource was based on 3km of a total 60km strike length.

Sinosteel's main resource asset in Australia at present is the Channar joint venture (40%) with Hamersley Iron in the Pilbara, a productive partnership that's been going since 1990 when the mine began operations at 3 million tonnes per annum – increased to 10Mtpa in 1998.

Last month it was revealed Sinosteel had emerged top of consortium with over $US2 billion to spend on developing major resource projects to help feed Chinese demand for commodities.

Midwest also hold the Koolanook/Blue Hills direct shipping iron ore project, which contains a reserve base of 7 million tonnes of haematite iron ore with exports planned at a rate of 1 million tonnes per annum. The project is currently in the development phase with the first product shipment expected later this year.

Midwest recently completed a $34 million capital raising to further development of its iron ore projects and exploration of its Weld Range project.

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