August 1st (Reuters) – Russian steel maker Evraz Group (HK1q.L: Quote, Profile, Research) has joined forces with China Metallurgical Group Corp (MCC) to gain access to Australia’s vast iron ore reserves and supply Chinese steel mills hungry for the key raw material.

Evraz, part-owned by billionaire Roman Abramovich, said on Thursday it would own 75 percent of a joint venture to develop the Cape Lambert Iron Ore project in Western Australia. MCC will own a quarter of the project, which will ship its ore to China.

 

“Given Chinese demand for the raw materials used in steel production is expected to remain very strong, having something in Australia seems like the right move,” said Vladimir Zhukov, senior mining analyst for Lehman Brothers in Moscow.

 

Global prices for iron ore, a crucial ingredient in steel, have quadrupled in the last five years as China — producer of a third of the world’s steel — devours ever more raw materials.

 

Benchmark prices set by leading miners BHP Billiton (BHP.AX: Quote, Profile, Research) (BLT.L: Quote, Profile, Research) and Rio Tinto (RIO.AX: Quote, Profile, Research) (RIO.L: Quote, Profile, Research) with Chinese buyers rose as much as 96.5 percent this year, the highest jump in a decade.

 

Evraz said in a statement MCC would be entitled to sign an offtake agreement for up to 60 percent of the iron ore produced.

 

Evraz said the Cape Lambert project would be able to produce 15 million tonnes a year of magnetite concentrate. It said the project was in the feasibility stage, but gave no time frame for the start of production or the cost of developing the project.

A potential drawback to the Cape Lambert project is its reliance on magnetite-type ore, which has been largely untested as a reliable source of feed for steelmaking.

 

Traditionally, the Australian iron ore industry has been based on mining higher-grade hematite ores, which currently account for 96 percent of Australia’s total iron ore production.

 

 

 

LONG-TERM INVESTMENT

 

Cape Lambert contains 1.56 billion tonnes of magnetite iron ore resources to internationally recognised Joint Ore Reserves Committee (JORC) standards, Evraz said.

 

“Evraz and MCC’s long-term commitment to the joint development of the project will further unlock the significant value of Western Australia’s mining industry,” Evraz Chairman and Chief Executive Alexander Frolov said through a spokesman.

 

He said the investment represented “an important milestone in the development of magnetite iron ore deposits in Australia”.

 

Cape Lambert Iron Ore Ltd (CFE.AX: Quote, Profile, Research) (CLIO.L: Quote, Profile, Research) this week completed the A$400 million ($378.8 million) sale to MCC of its namesake iron ore deposit, in a region where BHP Billiton and Rio Tinto both have major mining and shipping operations.

 

“Four hundred million dollars is a drop in the ocean for MCC,” said James Wilson, mining analyst for DJ Carmichael & Co in Perth, Australia. “It’s a long-term investment. They have 30 to 50 years of feedstock.”

Cape Lambert paid A$20 million in cash and stock options for the 408 sq km deposit in 2005. Its shareholders approved the sale on Monday following clearance from Australian foreign investment regulators, who have become wary of increased interest by foreign parties in Australia’s resources sector.

 

The Evraz deal is still subject to regulatory approval.

 

Evraz has already agreed to pay $1.5 billion for a controlling stake in another steel group, Delong Holdings (DELO.SI: Quote, Profile, Research), which holds an option to take about 12 percent of Cape Lambert. This had sparked speculation of a pending takeover bid until the sale to MCC was approved.

 

“Evraz already has a foothold in China. There could be synergies with Delong,” Lehman Brothers’ Zhukov said.

 

MCC, which controls assets worth $22 billion worldwide, is also involved in partnerships to develop nickel mines in Australia and Papua New Guinea. In the Pilbara region, it owns 20 percent of the Sino Iron Project near Cape Lambert.

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July 29th (Steel Guru) – It is reported that Royal Boskalis Westminster has been awarded a EUR 145 million contract by Rio Tinto for the expansion of its iron ore port facility at Cape Lambert in Western Australia. The contract is due to be completed in the second half of 2010.

The assignment includes the dredging of new berth pockets, turning and departure basins and an access channel and will be executed with a combination of cutters and hoppers. The contract is conditional on Rio Tinto obtaining various approvals, including environmental.

Boskalis officials said that “Global demand for maritime infrastructure continues to be strong. Specifically, large scale projects in such as Cape Lambert are driven by the strong demand for energy and natural resources. Boskalis can successfully capitalize on these developments through its global presence and its selective contracting policy.”

Mr Peter Berdowski CEO of Boskalis said that “As a consequence of the recently acquired projects in Dubai and Australia, our fleet is well utilized through 2009. The margins on these new projects are healthy despite increases in operational cost items such as fuel and steel. Furthermore, the margin development on current projects is in line with our previous expectations.”

July 29th (Interfax China) – China Metallurgical Group Corp. (MCC) has received approval from Australian-listed Cape Lambert Iron Ore Ltd. shareholders for the acquisition of the company’s namesake iron ore project, Cape Lambert announced on July 28.

July 18th (Reuters) – Australia’s Cape Lambert Iron Ore Ltd (CFE.AX: Quote, Profile, Research, Stock Buzz) said on Friday it had met with U.S. investment bank Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz) and steelmaker Evraz Group (HK1q.L: Quote, Profile, Research, Stock Buzz) on Thursday, but no new information had emerged.

Evraz, partly owned by Russian billionaire Roman Abramovich, has agreed to pay $1.5 billion for a controlling stake in another steel group, Delong Holdings (DELO.SI: Quote, Profile, Research, Stock Buzz), which holds an option to take about 12 percent of Cape Lambert.

 

Merrill Lynch is holding a stake in Cape for an unnamed party, widely believed to be Evraz.

July 15th (Trading Markets) – Mining giant Rio Tinto Plc. said it has invested over $500 million in power generation to support its expansion of iron ore mining capacity at Pilbara in Western Australia.

The company said it will build generation and transmission infrastructure near Karratha to supply electricity to its port and mine operations.

The new power station, to be commissioned in 2010, will use natural gas turbines, resulting in a significant reduction in emission rates compared with the two steam power stations currently in operation at the Cape Lambert and Dampier ports, which will be decommissioned, it said.

As part of the investment, Rio Tinto will also build a 220 KV power line from Cape Lambert to the new power station, the company added.

July 10th (Quamnet) – Cape Lambert Iron Ore Ltd said MCC Mining (Western Australia) Pty Ltd, a subsidiary of China Metallurgical Group Corp, has received key Chinese government approval for the acquisition of the Cape Lambert’s Pilbara iron ore project for 400 mln aud.

“The receipt of Chinese government approvals means the sale is now essentially conditional on the approval of Cape Lambert’s shareholders,” said Ian Burston, Cape Lambert’s executive chairman.

Shareholders can consider approving the sale at a meeting scheduled for July 28, he said.

June 26th (Interfax China) – China Metallurgical Group Corp. (MCC) expects to complete its talks with the Philippine government over the development of an iron ore mine on Mindanao Island in August, an MCC official told Interfax today.

“MCC is discussing with various Philippine government departments and local communities specific details of the iron ore mine investment, particularly exploration licenses and investment incentives,” an MCC official familiar with the project, surnamed Yu, said.

MCC signed a Memorandum of Understanding last week with the Philippine company LUPA to jointly develop the mine.

“MCC intends to develop the iron ore mine first, and follow it with a steel mill near by,” Yu said. However, he declined to give any information on the project’s planned capacity or investment figures, or comment on recent Philippine media reports.

According to a report in The Philippine Star last Friday, Environment Secretary of the Philippines Joselito Atienza said that MCC would initially invest RMB 10.30 billion ($1.5 billion) in developing an ore processing plant for the Mindanao Island mine project.

Yu said that local mineral resources and cheap labor in the Philippines are the main reasons for MCC’s interest in the project, and that in the future it may seek to develop other mineral resources in the country, such as nickel.

Surging iron ore prices in recent years have prompted China, the world’s largest iron ore consumer, to expedite development of overseas iron ore resources. MCC recently acquired the Australian Cape Lambert iron ore project for AUD 400 million ($383.90 million), which is currently undergoing a feasibility study for a production expansion project.