Australasian to double iron ore project

Alliances with Chinese steel makers will be the key to determining whether iron ore explorers become producers and exporters, says Australasian Resources Ltd managing director Andrew Caruso.

Mr Caruso was responding to comments by Rio Tinto Iron Ore chief executive Sam Walsh that only a handful of the 90 or so iron ore juniors on the Australian stock exchange would graduate to export the bulk commodity in the next few years.

Australasian is documenting a joint venture agreement for its flagship Balmoral South project in Western Australia’s Pilbara region with Chinese state-owned Shougang Corporation.

Shougang is an 8.4 per cent shareholder in Australasia and China’s fourth largest steel maker.

“I think there is competition for iron ore resources in the market and the more likely aspirants will be competing with Rio Tinto Ltd and BHP Billiton Ltd,’ Mr Caruso told AAP.

“Those companies that have the support of China, the support of a major partner, are more likely to be able to face that challenge rather than those who are facing longer timeframes to get into production without a major partner.”

Mr Caruso told a WA Mining Club function that China’s large cash reserves continued to offer great finance opportunities for future iron ore developments in Australia.

“The Chinese want to influence iron ore supply … and will make more investments in the future.”

Shougang has invested $56 million into Australasian and will decide whether to proceed with financing the Balmoral South project in June after reviewing the feasibility study, which is currently underway.

At this point, it can earn 50 per cent of the project and secure all product offtake for 25 years, offering 100 per cent of the project financing interest free in return.

Australasian said on Thursday it could double initial production from the project to 24 million tonnes per annum (Mtpa).

The project is slated to commence production in 2010/11.

Australasian said it expected to secure environmental approval by October for an operation up to 24 Mtpa.

Mr Caruso said he wanted to dispel myths about magnetite iron ore, which was widely underrated compared with hematite iron ore.

“50 per cent of the world’s iron ore supply comes from magnetite … it’s not as exotic as it is sometimes portrayed,” he said.

“China has used magnetite for many decades … and are used to working in other cultures.”

Mr Caruso said industry observers needed to “get past” the magnetite versus hematite debate.

Shares in Australasian closed up nine cents or 5.96 per cent to $1.60 after an intraday high of $1.65.

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