Australia's Golden West in Chinese Iron Ore Deal
Australian iron ore firm Golden West Resources
The deal, announced by Golden West on Tuesday, follows several similar alliances where Chinese steel-makers have bought stakes in Australian iron ore miners, anxious to secure supplies of an essential raw material that is in short supply.
Golden West is still in the exploration phase, one of several smaller firms in a new iron ore precinct in west Australia. Like its fellow prospectors, it needs fresh equity and forward sales to help fund mining development.
"Getting the Chinese involved now is an indication that there's a strong resource and a viable resource," Golden West spokesman Paul Downie said.
Under the deal, Golden West would supply up to 4.5 million tonnes of iron ore a year to Hunan Valin Steel Tube & Wire, which is one-third owned by Arcelor Mittal
Golden West has not given a timeframe for production start-up, partly because the port it intends to use for exports has not even been built yet. The proposed Oakajee port is expected to be completed by about 2013, according to local media.
The company said Valin would also buy 14.4 million new Golden West shares at A$1.85 each, raising A$26.6 million ($23.4 million) for Golden West, conditional on approvals from China and Australia's Foreign Investment Review Board.
Golden West closed up 0.6 percent on Tuesday at A$1.69.
Australian miners, ranging from global heavyweights BHP Billiton
China's Sinosteel has won a $1.3 billion bid battle for iron ore prospector Midwest Corp
Earlier this year, China's state-owned Aluminium Corp of China (Chinalco) and its U.S. partner, Alcoa Inc
Last month, Golden West estimated inferred resources of 119 million tonnes, at 58.9 percent iron, at its Wiluna West deposit, saying this was the second-largest resource of its type in Western Australia state's emerging Mid-West iron ore province. (Reporting by Mark Bendeich; Editing by Lincoln Feast)