Hunan Valin Steel to buy 11.39% stake in Australian miner Golden West

Friday, 15 August 2008 15:30:05 (GMT+3)   |  
       

SteelOrbis Shanghai

China's Hunan Valin Steel Tube & Wire Co. has announced that it has entered into an agreement to buy 14.4 million new shares in Australia-based iron ore miner Golden West Resources at AU$1.85 per share, raising a total of AU$26.64 million (RMB 170 million), for the purpose of making up their shortfall in iron ore supplies. The shares in question represent an 11.39 percent stake in Golden West.

A precondition of the deal is an iron ore supply contract inked between the two parties. According to this contract, if the annual iron ore production of Golden West is 10 million mt or lower, Golden West will supply 4.5 million mt of iron ore to Hunan Valin Steel based on the price agreed at the Sino-Australia iron ore negotiations; if annual production exceeds 10 million mt, then Hunan Valin Steel will be entitled to buy 50 percent of the additional production at the said price level. The duration of this contract is 15 years, and Hunan Valin Steel will be entitled to extend the contract period by a further 10 years.

Australian Stock Exchange-listed miner Golden West has proven iron ore resources of up to 119 million mt, with an expected annual output of 10 million mt of iron ore. However, still in its exploration phase, Golden West posted a negative net profit for 2007.

The deal is expected to receive the necessary approvals from Australia's Foreign Investment Review Board and the relevant Chinese authorities.


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