Wuhan Iron to Buy 50% of Australian Iron Ore Project

• Source: Caijing
• [14:37 May 06 2009]
• Comments

Wuhan Iron and Western Plains Resources will jointly develop the Hawks Nest iron ore deposit in South Australia.

Wuhan Iron and Steel Group, China's third largest steel producer, has agreed to buy a 50 percent stake in Western Plains Resources Ltd's (WPG) Hawks Nest project in South Australia, the two companies said.

The two companies will set up a 50-50 joint venture to develop the Hawks Nest iron ore deposit, they said in separate statements on their websites on May 4.

Wuhan Iron will initially invest AU$ 25 million in a feasibility study and has committed to investing a further AU$ 20 million for future operations, WPG said, adding that the stake will be capped at 50 percent.

WPG will also issue 12.1 million new shares, or a 15 percent stake, to Wuhan Iron at AUD 0.25 per share, for around AU$ 3 million.

Wuhan Iron will become WPG's second largest shareholder, the Chinese company said.

WPG also said that as a condition of the new partnership, it cannot be removed as the manager of the joint venture.

Wuhan Iron was granted rights to purchase 50 percent of WPG's share of magnetite iron concentrate production on commercial terms, WPG said.

Total iron deposits at the Hawks Nest project are estimated at 5.7 million tons, it said.

The transaction is subject to approval of government authorities, including Australia's Foreign Investment Review Board and the National Development and Reform Commission in China, it said.

China, the world's top steel producer and consumer, is seeking to secure long-term iron ore supplies overseas via acquisitions or by taking project stakes.

Despite of the retreat in iron ore prices recently, China's steel industry is looking beyond the current slump in the market to secure reliable resources as cost-effective prices.

In the past month China's Hebei Iron & Steel signed a supply agreement with Australia's Aurox Resources.

Earlier, Australia's government approved a China's state-owned Minmetals' purchase of OZ Minerals' assets for USD 1.2 billion.  The deal is still awaiting a shareholder vote and regulatory approval from Beijing.

Fortescue Metals Group also said China has approved Hunan Valin Iron and Steel Group's AUD 1.3 billion investment in the company.

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