A Xinxing Ductile Iron Pipes booth at a water treatment exhibition in Beijing. The company plans to invest up to $1 billion in a Canadian iron ore project after establishing a joint venture with Advanced Explorations Inc, a listed resource development company in Canada. [China Daily]
Xinxing Ductile Iron Pipes Co Ltd, a subsidiary of State-owned Xinxing Pipes Group Co Ltd, plans to invest up to $1 billion in a Canadian iron ore project to diversify its mineral source after the recent formation of a joint venture with Advanced Explorations Inc, a listed resource development company.
Xinxing Ductile Iron Pipes, one of the world's largest producers of cast iron pipe, said on Monday that it will formally execute an agreement with Canada's Advanced Explorations to jointly develop the proposed Roche Bay magnetite mine in Nunavut, located on the north coast of Canada.
Under the agreement, Xinxing Ductile will invest $20 million into the Roche Bay joint venture to complete the mine's feasibility study, and a further $30 million upon completion of the study. The company will also fund up to $1 billion for the development of Roche Bay.
Xinxing Ductile, and China Huaxin International, will pay $5.3 million for about 19 percent of Advanced Explorations' shares at a price of 25 cents per share, according to the terms of agreement.
In return, Advanced Explorations will provide Xinxing Ductile with half of its iron ore output once the Roche Bay project begins production.
The Roche Bay project holds resources of 357 million tons of magnetite with an estimated mine life of at least 50 years, Advanced Explorations said in a separate statement.
Commenting on the exercise in a research note, Guosen Securities said the deal is Xinxing's strategy to expand into the upstream business via resource acquisition.
The deal came at a time when the Chinese government ordered some 48 steel mills to stop operating for one month to meet the country's energy efficiency target.
China wants to cut iron ore purchases from the world's three biggest miners - Vale SA, BHP Billiton Ltd and Rio Tinto Group - following a recent decision by the global miners to drop a 40-year custom of setting annual prices.
In addition, Aluminum Corp of China Ltd and Wuhan Iron & Steel Group are leading an overseas drive for resources by investing in African and Brazilian mines.
Aluminum Corp of China agreed to invest $1.35 billion in the Simandou iron ore project in Guinea. Wuhan Steel has invested in Brazilian miner MMX Mineracao e Metalicos SA.
China's overseas investment in iron-ore mining has concentrated in West Africa, Russia, Australia, and Southeast Asia.
On April 1, China Railway Materials Commercial Corporation agreed to work with African Minerals to develop the Tonkolili iron-ore deposit in Sierra Leone.
Meanwhile, Chinese steel mills have also turned to smaller iron-ore miners to secure cheaper price contracts. On April 22, Sinosteel Corp, the nation's largest iron-ore trader, announced it would buy half the output from Brockman Resources Ltd's Marillana project in Western Australia.
