China’s ’giant iron ore deposit’ seems of little interest to domestic steel mills
Two Chinese steel mills on Friday denied holding a stake in, or firm plans to develop, an iron ore deposit that local officials had touted as the biggest in Asia.On Wednesday, the China News Agency reported officials in northeast China’s Liaoning province as saying the newly discovered deposit had reserves of at least 3 billion tonnes, and could produce up to 5 million tonnes by 2015.The announcement came as negotiations between Chinese steel mills and overseas iron ore suppliers approached the June 30 deadline, when term contracts revert to spot prices.Benxi Iron and Steel Group owned a 20 percent stake in the deposit, the report had said. Bengang officially merged with Anshan Iron and Steel Group four years ago, but is still de facto independent."Bengang Group denies that it has a 20 percent stake in this deposit, or that it has signed any agreement with Shenzhen Yizongxin or the Liaoning Geological Bureau, although it is considering participating with the consortium in initial exploration and development work," Bengang Steel Plates Co Ltd (000761.SZ: Quote), a Bengang-listed unit, said in a statement."But because this project has a number of approvals to go through, the outcome is not at all certain."A Liaoning geological official reached by Reuters on Wednesday had said the main investor was a Shenzhen-based company, which he declined to name, and added the Liaoning government would also own 20 percent."After requesting more information from Anshan Iron and Steel Group, the listed company management and the group can state that we have absolutely no knowledge of this resource," Angang Steel Co (000898.SZ: Quote) said in a statement to the Shenzhen exchange."Moreover we have absolutely no intention to invest in its development and have never even discussed such a move."Shares in Angang (0347.HK: Quote) had been suspended on the Hong Kong and Shenzhen exchanges on Thursday, pending an announcement.Some analysts had doubted how much of the deposit could be economically mined, noting that it was at least one kilometre below the surface. Iron content in the magnetite and hematite orebody ranged from a desirable 62 percent to a relatively unimpressive 25 percent.After years of inactivity, China’s geological bureaus have broken out of the Soviet pattern of simply exploring for resources, then handing them over to state-owned firms for development.They now often develop deposits themselves and have expanded aggressively into overseas explorations.However, the bureaus and the local governments where their deposits are located have also become more prone to exaggerating assets in order to attract and sign an investment partner.