Hanlong courts Chinese steel majors to help develop African iron ore project
Source: www.chinamining.org Citation: Platts Date:Jan.25, 2013
China`s Hanlong Group has approached Hebei Iron & Steel and Wuhan Iron & Steel about investing in the $4.7 billion Mbalam iron ore project in central Africa, which Hanlong is set to acquire through its takeover of Australia`s Sundance Resources, a company official said Thursday.
The Hanlong official confirmed the company had spoken to the Chinese steel giants about helping to develop Mbalam, which straddles the border between the Republic of Congo and Cameroon, and requires significant new mine, port and rail infrastructure. It is expected to eventually produce 35 million mt/year of direct shipping ore.
But Hanlong has to firstly complete the A$1.4 billion ($1.5 billion) acquisition of Western Australia-based Sundance, a deal which is being funded by China Development Bank.
Sundance head of investor relations Jill Thomas would not comment specifically on the prospective involvement of the Chinese mills, other than to say it was "a matter for Hanlong."
The Perth-based official said Sundance was still working towards the completion of the takeover, which "should be wrapped up by the end of February or March 1."
Wuhan already owns iron ore assets in Liberia and Madagascar, as well as in Australia, Canada and Brazil. An official in Wuhan`s investment department would not confirm the mill`s interest in the Mbalam project.
Last month China`s National Development and Reform Commission said the country must continue to invest in overseas iron ore projects to meet growing demand for the steelmaking material over the next decade.
A Beijing-based steel analyst was skeptical that Wuhan would be in a position to invest in the Mbalam project, saying its other African projects and prospective 10 million mt/year greenfield integrated steel project in China`s Guangxi province would be highly capital intensive.
He also pointed to unsuccessful investments by Chinese companies in overseas iron ore projects, most notably CITIC`s Sino Iron magnetite project in Western Australia.
"Such investments may have scared off Chinese investors; plus Africa is also troubled by political instability, which will not guarantee a good investment environment," he said.
A Melbourne-based mining source said it was "difficult to think of a single successful Chinese iron ore project outside of China."
Hebei and Wuhan were ranked number two and five respectively in the World Steel Association`s list of top global steel producers in 2011.
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