Wuhan Iron Steel Corp (WISCO), one of the largest steel makers in the country, has agreed to invest US$240 million to acquire a 19.9 percent stake in a Canadian mining company, in a move to secure its iron ore supply.
Canada's Consolidated Thompson Iron Mines Ltd said on Monday that WISCO will make a total investment of US$240 million in itself and, in return, it will issue 29,748,897 common shares to the Chinese company.
In addition, WISCO will receive not less than a 25 percent interest in a newly incorporated company that is to be established to operate the Bloom Lake mine. It will also purchase a similar percentage of iron ore produced over the life of the mine.
Consolidated Thompson's CEO Richard Quesnel said in a statement that the company viewed the investment as a key strategic step in developing a long-term partnership with an important consumer of iron ore and expected the deal to provide necessary capital towards the completion of construction at Bloom Lake.
"This partnership will also strengthen Consolidated Thompson's potential to expand from the current mine plan of 8 million tons per year to 16 million tons of annual production of iron ore," he said.
Officials from WISCO declined to comment on the deal.
WISCO's bid is aimed at securing overseas iron ore supply and reduce dependence on the world's top-three iron ore miners, BHP, Rio Tinto and Vale, said Ma Tao, analyst with Bohai Securities.
He said the steel maker would see its production capacity further expand when it merges with or acquires other steel makers in the country to build a "stronger" steel group.
The agreement is still subject to approvals by the governments of both countries. The Balloch Group is acting as financial advisor to WISCO for this transaction.
In another development, another Chinese steel maker, Hunan Valin Iron and Steel Group yesterday won government approval for its US$438-million investment in Australian iron ore producer Fortescue Metals Group, Reuters reported.
(China Daily April 1, 2009)
