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Domestic

CITIC Pacific to sell ore from Oz project to Chinese mills

(China Daily/Agencies)
Updated: 2009-11-13 08:57

CITIC Pacific Ltd, an arm of China's biggest State-owned investment company, signed accords to sell as much as two-thirds of the iron ore from its $4-billion Australian project to Chinese mills.

"We've identified the major steel works in China who have signed up preliminary sales agreements," Barry Fitzgerald, chief executive officer of the Hong Kong-based company's Australian unit, said in an interview. The balance of the output will be used by the company's own plants in China, he said.

China is expected to use more iron ore in the next five years than Australia, the biggest exporter, has produced in its history, Rio Tinto Group said this month. The Asian nation's economic growth may accelerate to 10.5 percent this quarter, according to a Bloomberg survey, as stimulus spending boosts demand for automobiles and refrigerators.

"China's appetite for iron ore will continue to be very strong," said Michael Heffernan, a client advisor with Austock Securities Ltd. "While the rest of the world has been floundering around looking for lifeboats, China just keeps on surfing. Its growth is improving again."

Of the mine's 28-million-ton output, as much as 20 million tons may be sold to customers with the rest kept for CITIC Pacific's own steel plants in China, Fitzgerald said.

CITIC Pacific also develops properties and runs toll roads.

"China demand will continue," Fitzgerald said in Perth, declining to name the mills that had signed initial accords. "The stimulus package is a short-term issue. The long-term market will be there."

First output is scheduled in the fourth quarter next year from CITIC Pacific Mining's Sino Iron project at Cape Preston, 100 km southwest of Karratha in Western Australia's Pilbara region.

CITIC Pacific Mining may consider expanding the project, Fitzgerald said. The company "can either increase the length of our operation or increase the capacity," he said. "Once we are able to move our focus from delivering the start-up of production and adding the additional lines, I'm sure we'll need to review what the demand is and what the pricing points are."

CITIC Pacific jumped as much 10 percent, the most since July 31, to HK$22.40 ($2.89) and closed up 9.09 percent to HK$22.2 in Hong Kong, compared with a 1-percent drop in the benchmark Hang Seng index. The stock has more than doubled this year.

China has proposed 90 investments in Australia valued at about A$34 billion ($31 billion) in the past 18 months, the Canberra-based Foreign Investment Review Board said in September.

Fox Resources Ltd, backed by China's Jinchuan Group Ltd, said on Wednesday it's in talks with a potential Chinese partner to help develop an iron ore project in Australia.

The open pit mine will be one of the largest in the world, and over its estimated 25-year life span will be 5.5 km long, 3 km wide and 600 m deep. After the material is mined, it will be transported to six grinding mills. The mills, being built in China, will be shipped on site from January.