Wuhan Set To Buy Half Of Sa Iron Ore Project

The Age

Friday December 19, 2008

BARRY FitzGERALD

CHINA'S steel industry has swooped again on an Australian magnetite (iron ore) project, prompted in part by the collapse in local equity values and the increased purchasing power of the yuan.

This time it is Adelaide's Centrex Metals that has been plugged into China's long-term planning to secure raw material supplies for its steel industry, now the world's biggest.

State-owned Wuhan Iron & Steel (Wisco) is set to pay up to $180million (in stage payments) for a half-share in Centrex's most advanced magnetite deposits on South Australia's Eyre Peninsula, as well as take up a $9.7million placement of Centrex shares at 25 each.

The deal is subject to Chinese and Australian government approval. In the case of Canberra approval, the deal meets the tougher guidelines set down earlier in the year, which encourage state-owned groups from China or elsewhere to seek joint ventures in Australian resource projects rather than takeovers. The Wisco-Centrex deal follows last year's swoop by Chinese interests on the Savage River magnetite/pellet operation in Tasmania, now housed inside locally listed Grange Resources.

Despite the global financial crisis causing havoc in markets for steel-making raw materials and the steel industry itself, Wisco is said to be committed to completing a new $US30billion ($A42.78billion) steelworks in southern China that could eventually produce 50million tonnes of steel annually.

Such production would require about 80million tonnes of magnetite concentrates, with Centrex's Eyre Peninsula deposits slotted to supply 5million-10million tonnes annually for more than 40 years.

First production from the coastal magnetite projects in 2012-13 is on the cards. But key to the development proceeding will be the development of a bulk export port at Sheep Hill, 20 kilometres north of Tumby Bay on the south-east coast of the peninsula.

Centrex managing director Gerard Anderson said the company-making deal had been in the works since July. "We share Wisco's expectation that the steel industry will rebound strongly some time in the future," he said. Centrex shares closed 0.5 higher at 23. Centrex expects the deal to be completed in March next year.

© 2008 The Age

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