Anshan Iron & Steel to invest A$39m in Western Australian project

PUBLISHED : Tuesday, 05 June, 2007, 12:00am
UPDATED : Tuesday, 05 June, 2007, 12:00am


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Anshan Iron & Steel Group, the mainland's second-largest steelmaker, has agreed to buy A$39 million (HK$253.5 million) worth of shares in an Australian joint venture as part of its strategy to tap overseas resources.

AnSteel agreed to buy a 12.94 per cent stake, or 65 million shares at 60 Australian cents each, in iron ore miner Gindalbie Metals, Perth-based Gindalbie said.

The funds raised from the deal would be spent on the Karara magnetite and the Mungada hematite projects in Australia, both of which are under development in a 50-50 venture between Gindalbie and AnSteel, it said.

'We have been working closely with Gindalbie over the last 18 months to advance the Karara project to a position where we are very confident in the capacity of this project to be able to deliver a long-term supply of high-quality iron ore for us,' AnSteel's president Zhang Xiaogang said. 'This strategic investment in the Australian resource sector is a very important step by AnSteel into the international capital and metals markets.'

AnSteel's investment, which will make it Gindalbie's second-largest shareholder, underscores mainland steelmakers' needs to expand overseas to reduce reliance on imports for which prices have been rising.

Last month, AnSteel joined Wuhan Iron & Steel, Baosteel Group and Shougang Iron & Steel Group, and set up a joint venture to invest in iron ore projects in Cambodia.

The mainland's imported iron ore prices rose 9.5 per cent this year, following a 19 per cent increase last year and a 71.5 per cent jump in 2005. Prices were set after negotiations between steelmakers and global suppliers such as BHP Billiton and Companhia Vale do Rio Doce. The mainland is the world's largest buyer of iron ore.

If approved, AnSteel's investment would enable the company to appoint two members to the Gindalbie board.

Liaoning-based AnSteel, which controls Hong Kong and Shanghai-listed Angang Steel, formed the venture with Gindalbie in April last year to explore and produce iron ore for the Karara project in Western Australia.

Located 220 kilometres east of the port of Geraldton, the A$1 billion Karara project aims at producing 10 million tonnes of iron ore annually by 2010 and its iron ore will help to feed Angang Steel's new five million-tonne steel project in Bayuquan port in Yingkou.

The Karara project, which is still under a bankable feasibility study, has resources of an estimated 1.29 billion tonnes of iron ore with more than 40 years of mine life.