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Minmetals ponders Marampa investment

By Zhang Qi (China Daily)
Updated: 2009-11-07 08:32

Metals trader China Minmetals said on Friday that it was conducting research on a London Mining iron ore project and has not signed any cooperation deal for the same.

The company made the statement in response to the UK iron ore developer's claim that it had held talks with Chinese commodity trading companies over the project.

London Mining said on Friday it held talks with China Minmetals and Sinosteel Corp, China's largest iron ore trader, as well as China National Railways for its Marampa project in Sierra Leone.

"We are having these discussions now," Chief Executive Officer Graeme Hossie said in a Bloomberg's interview. "I'm confident they will lead to potential cooperation which could include investments to accelerate production or a joint venture."

A source familiar with the matter from China Minmetals said the company is yet to take a decision on whether to invest and is still studying the project.

"Given the concerns over shipping conditions and the cash flow of London Mining Plc, the project might not be a priority choice for Minmetals," he said.

According to the source, Minmetals would rather look for suitable iron ore acquisitions projects in Australia and Africa, like Mauritania, and largely focus on small- and medium-sized projects.

An overseas M&A project might come out by the end of this year, he said.

Minmetals spokesperson Ma Jun had earlier said the company is seeking to purchase an iron ore project in Mauritania of West Africa and has completed preliminary studies on the project. Sinosteel and China National Railways couldn't be reached for comments.

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London Mining has begun developing the Marampa project and expects annual production of 1.5 million tons in 2011, Hossie said. The $85-million cost of the mine's first phase would be funded from London Mining's $230 million of cash reserves, he said.

The company and its US partner Wits Basin Precious Minerals Inc also plan to expand the Xiaonanshan mine that produces 400,000 tons a year in China by buying two adjacent deposits, Guqiao and Sanbanqiao, he said.

Chinese investors have been enthusiastic to buy overseas iron ore resources to break the monopoly of the three global miners Vale, Rio Tinto and BHP Billiton.

The latest in this process was Wuhan Iron & Steel Group's $247-million investment into Australian iron ore firm Centrex, followed by Baosteel's acquisition of a 15-percent stake in Aquila Resources.