Chinese steel groups zero in on Mid-West iron ore juniors 6th...

Chinese steel groups zero in on Mid-West iron ore juniors

6th November 2006, 11:30 WST

Shougang Steel’s foray into Mt Gibson Iron’s hostile bid for Aztec Resources last week has again highlighted the desperation of China’s steel makers to lock up future sources of supply.

But while Shougang’s move garnered lots of headlines, other moves are also afoot in the State’s Mid-West which may prove just as important in the ultimate make-up of WA’s junior iron ore sector.

In its September quarter report last week, junior iron ore miner Midwest Corporation revealed year-todate production of almost 570,000 tonnes at its starter hematite mine at Koolanooka as well as promising drill results which confirmed grades of up to 63 per cent at its flagship Weld Range project near Cue.

Weld Range is the key to Midwest’s long-term prospects, with the company hoping to outline sufficient high-grade hematite to support a 15 million to 20 million tonnes-a-year direct shipping operation once a railway to the proposed Oakajee deepwater port is complete.

But buried in the report was the revelation that it was also seeking an agreement with its current Chinese partner, SinoSteel, as well as two new Chinese groups — China Railway Engineering Corp and China Communications Construction Group — to undertake the funding, construction and operation of the proposed $1 billion-plus port and rail infrastructure.

The push comes a year after Midwest signed up SinoSteel as a 50:50 partner in studies into the Weld Range mine, plus Midwest’s untapped magnetite resources around Koolanooka. Midwest said SinoSteel and the two engineering groups together had “significant experience” in financing, constructing and running port and rail facilities and might also provide access to Chinese funding — a clear reference to the $US3 billion ($3.8 billion) war chest Sinosteel has secured for investment in overseas resources developments.

What makes the move significant is that it is a clear sign the top echelon of China’s steel industry is jockeying for ultimate control of future iron ore production from the Mid-West to shore up its own long-term needs. Furthermore, it shows that Chinese groups such as SinoSteel are determined not to be outflanked by their Asian rivals — either in China or its heavyweight neighbours, South Korea and Japan.

Already this year, Korean steel giant Posco and Japan’s Mitsubishi Corp have teamed with Murchison Metals to study a 25 million tonnesa-year hematite development in the Cue region at Jack Hills.

At the same time, Chinese steel giant AnSteel is pushing for Gindalbie Metals to fast-track its planned $1 billion Karara magnetite mine in the Mid-West to feed a massive $US3 billion steel complex it is building near Yingkou in China’s Liaoning Province. AnSteel will be a 50:50 partner in Karara, while Gindalbie will own half of a $180 million pellet plant to be built as part of the steel complex.

And Hong Kong iron ore trader Sinom is also planning to develop the nearby Extension Hill magnetite project after buying it from Mt Gibson for $52.5 million earlier this year.

It is believed that the likely broadening of Midwest’s Weld Range partnership to include China Rail and China Communications is in large part a response to fears that control of key Mid-West shipping infrastructure — namely the planned Oakajee port and northern rail link — may fall into the hands of Posco and Mitsubishi.

Murchison and Midwest are working together on feasibility studies into the so-called northern transport corridor to determine the most efficient and timely development route.

However, their respective joint venture partners are keen to take the dominant role in the construction and ownership of the necessary transport infrastructure to safeguard the security of their long-term ore supplies from the region.


Still on China’s growing involvement in WA’s junior iron ore sector, Chinese steel pipe group Xingxing Iron Pipes Co is now believed to be eager to sign a formal agreement with Pilbara magnetite hopeful Cape Lambert Iron after a trip to the site near Karratha last week. Xingxing last month signed a memorandum of understanding to acquire 19.9 per cent of Cape Lambert and at least one million tonnes of magnetite concentrate annually once the project is in production.

After visiting the site, Xingxing executives are believed to have told Cape Lambert officials that the project appeared more robust than they initially expected and were keen to formalise their participation in the project and company.

Cape Lambert’s namesake project has total JORC resources of more than 2.5 billion tonnes, 10km from Rio Tinto’s Cape Lambert port.

JOHN PHACEAS

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