Wuhan grabs Aussie ore share
Wuhan Iron and Steel (Group) Co has agreed to invest up to A$180 million (US$127 million) for a half share in the iron ore projects owned in South Australia by Centrex Metals Ltd.
The Chinese steel major will also pay A$9.7 million for a 15-percent share in Centrex as a strategic investor, Centrex, the Aussie firm which is prospecting mines but has yet to start production, said in a statement yesterday. It also agreed to develop a deep-water export port on the Eyre Peninsula in South Australia.
The deal comes as several Chinese companies renew interest in buying into Australia’s mining sector, taking advantage of lower values and falling commodity prices caused by the economic meltdown.
Global annual contract prices for iron ore, for which China is one of major buyers, have surged for six consecutive years. But major investment banks are forecasting that the prices will fall by 20-50 percent for next year given the slower demand from mills. Analysts said buyers still face risks for the time being as there are many uncertainties in the mining industry.
“As Centrex could start production well after 2010, it’s hard to say if it’s a good deal for Wuhan Steel now. In the long run from the steel industry’s perspective, the trend for iron ore prices is still unclear,” said Hao Rongliang, an analyst at Zhongshang Liutong, a government-backed trade information service. “The other risk for Wuhan in the deal is cash flow.” Wuhan Steel could not be reached for comment.
Tags: China Investment, iron-steel