WISCO Runs Into Difficulties Over Australian Iron Ore Project...

WISCO Runs Into Difficulties Over Australian Iron Ore Project Acquisition From CITIC Pacific

Wuhan Iron and Steel Corp. (WISCO) has run into negotiation difficulties with CITIC Pacific over its intended stake acquisition of iron ore projects in Western Australia's Pilbara region, a WISCO official told Interfax today.

"Although we have come up against various difficulties in finalizing a deal with CITIC Pacific, this is a long-awaited project and we don't intend to abandon it easily," a WISCO official, who asked to remain anonymous, said.

Another WISCO official from the development planning office, surnamed Chen, said "the problem has nothing to do with price, but concerns how the project will be managed. We still intend to acquire 50% of CITIC Pacific's stake in the projects, which will leave us with approximately 40% interests in the projects. Moreover, in May last year, CITIC Pacific agreed to sell WISCO 50% of its stake in the magnetite mine, which contains 1 billion tonnes of proven iron ore reserves."

Chen further commented that whatever the outcome, a decision will be reached in the very near future.

According to a report published last Thursday by Hong Kong-based newspaper Wenweipo, WISCO is currently negotiating to acquire a 20% stake in various CITIC Pacific magnetite projects in Western Australia's Pilbara region. The China Metallurgical (Group) Corp. (MCC) signed a purchase agreement with CITIC Pacific on Aug. 20 for a 20% stake in the projects, and CITIC Pacific intends to retain control of the projects with the remaining 60% stake.

The Wenweipo report also revealed that both Tangshan Iron and Steel Group and Handan Iron and Steel Group previously negotiated for stake in the projects with CITIC Pacific but were unable to reach an agreement.

CITIC Pacific owns the Sino-Iron Project and Balmoral Iron Ore Project in Western Australia, and has been searching for equity partners to help develop the projects. The MCC is currently awaiting administrative approval from both the Chinese and Australian governments for its 20% stake in the projects.

CITIC Pacific intends to commence initial production from the iron ore projects in 2009, and will supply both the company's own steel mills, as well as other steel mills in China