Chinese Steelmaker Takes Stake in Australian Merger

Sept. 25, 2008
The merge capitalizes on rising global demand for iron ore.

Australian miner Grange Resources Ltd. and Chinese-backed Australian Bulk Minerals (ABM) said on Sept. 25 they had agreed to merge to capitalize on rising global demand for iron ore.

The deal to create a company with a market value of about a billion dollars (US$840 million) gives Chinese steel producer Jiangsu Shagang Group Ltd., ABM's biggest shareholder, a 45% stake.

It will combine ABM's 2.3 million ton per year Savage River magnetite mining and pellet operation in Tasmania with Grange's Southdown magnetite project in Western Australia.

"Combining the magnetite knowledge of ABM and Grange is a benefit that cannot be overstated," Grange managing director Russell Clark said. "No other company will be able to apply the experience from operating a magnetite iron ore asset like Savage River to a quality development opportunity such as Southdown."

The $1.6 billion Southdown project is expected to start production by 2013 and is a joint venture between Grange, which holds 70%, and Japanese group Sojitz Corp.

The merger deal will see Grange issue about 380 million shares to ABM shareholders, who will end up with 73.9% of the merged entity, while Grange's existing shareholders will have 26.1%.

In addition to Shagang's 45% holding in the combined group, RGL Group Co. Ltd., a Chinese steel trader, will own 13.3% and Pacific Minerals, a Hong Kong-based iron ore trader, 8.0 percent.

Chinese interest in Australia's resources sector has grown as it seeks to secure supplies for its rapid economic expansion in the face of steep price rises. The Australian government has said it welcomes foreign investment but will ensure that major deals are in the country's national interest.

Copyright Agence France-Presse, 2008

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