teck cominco on the prowl for iron ore

POWERFUL Canadian miner Teck Cominco is sniffing around Australia's mid-sized iron ore companies for an entry into a market that is booming on the back of rampant Chinese and Indian demand.

Teck president Don Lindsay said yesterday after his Diggers & Dealers presentation that investors in Teck had asked the board to consider getting into iron ore as a way of offsetting the company's exposure to the volatile base metals market.

Teck - a Vancouver-based company with interests in coal, zinc, gold and copper - is already in the midst of a muddy $20 billion takeover battle for nickel producer Inco with Phelps Dodge.

Mr Lindsay said it would not increase its offer and was quite prepared to walk away from the deal should Inco continue to play hardball.

"We don't have to move on nickel, we could move to iron ore, diamonds or copper," Mr Lindsay said.

"The key is to get a project which is not currently operating.

"Iron ore would fit with our core competency of revenue where 35 per cent of revenue comes from the (metals not traded on the London Metals Exchange).

Teck already has assets here with the Lennard Shelf zinc mine located near Derby, in far north Western Australia, a short distance from Aztec Resources' Koolan Island iron ore project.

Any move by Teck would come amid a break in talks between Gindalbie Metals, Mount Gibson Iron and Aztec Resources.

Mount Gibson has launched a 3-for-1 scrip takeover bid for Aztec, which the target board labelled opportunistic.

The unsolicited bid came two weeks after Aztec announced it was restarting work on its Koolan Island project, which is infested with crocodiles.

Koolan has an inferred resource of 53 million tonnes and a nine-year mine life, with drilling expected to improve the size of the hematite ore body.

First shipment is expected next year and Aztec is on the brink of signing three long-term supply contracts.

Aztec chairman Ian Burston said that to be a decent sized player in the industry, a miner needed to ship 15 million tonnes a year.

But Mr Burston has virtually resigned himself to the likelihood that, if shareholders see off the $280 million bid, either Mount Gibson or someone else will come knocking within the next 12 months. "You have to forget about the emotion of the attachment to Koolan Island when you consider these bids," Mr Burston said.

"We are not violently opposed to an offer.

"But any offer has to be good for shareholders.

"Whatever the outcome, it will be in the best interest of shareholders.

"The reality will be the opportunity and rewards of bringing ore to the market.

"There is a fair bit of emotion in the market about the big three - BHP Billiton, Rio Tinto and CVRD - having their hands on the taps and controlling price negotiations for iron ore."

A bidder's statement is expected within a week.

"Teck is an obvious suitor, I would tell Don Lindsay that the data room is open," Mr Burston said.

"Who knows, we might even make a reverse bid for Mt Gibson.

"I was joking but who knows where it all may lead."