On July 20, Chinese steelmaker Wuhan Iron & Steel Corporation Limited (WISCO) and Canada-based mineral exploration company Consolidated Thompson Iron Mines Limited (CLM) announced the completion of all procedures for WISCO's strategic investment totaling US$240 million in CLM. Accordingly, WISCO acquires an approximate 19.9 percent stake in CLM and becomes its largest shareholder. In addition, WISCO now holds a 25 percent interest in CLM's Bloom Lake property, and has committed to purchase, at fair market value, 50 percent of the ore produced by Bloom Lake. This is the first time WISCO has acquired a stake in an overseas iron ore mine.
According to the deal, WISCO will participate in the development of three of CLM's mines, with total reserves amounting to 2.3 billion. The NI43-101 mineral reserve for Bloom Lake is estimated at 909 million mt. With complete infrastructure and ready-to-use water and electricity supply, the production cost of the Bloom Lake project is quite low. In addition, when the expansion project of the Panama Canal opens to navigation in 2014, the shipping freight costs for this mine will be lower than for Brazilian ore.
The framework agreement was inked in February 2009, with the official cooperation agreement signed in June 2009. In July 2009, this project received approval from the relevant authorities of the two countries.
WISCO has made a total investment of $240 million in CLM. One part of the payment is for the purchase of about 38.68 million common shares at AU$2.72, representing approximately 19.9 percent of CLM; meanwhile, the other part of the payment is for investment in a joint venture established between the two companies for the development of iron ore projects. The first stage of the project will be put into production in November 2009, which will give WISCO four million mt of high grade iron ore per year.
Also on July 20, WISCO inked an cooperation agreement with Australia-based Centrex Minerals (CXM) on the joint development of an iron ore project in the central and southern Eyre Peninsula of South Australia - the biggest iron ore project in South Australia. With a total area of about 600 square kilometers, the mine in question has an estimated reserve of more than two billion mt.
The cooperation project will be carried out in two steps. On the one hand, WISCO will buy common shares issued from CXM and thus become the second largest shareholder in this company. On the other hand, the two parties will make a joint investment in the exploration, development and building of some of CXM's mines. The first phase of construction will be finished within three years and the second phase will take two years, with a total production capacity of 10 million mt of iron ore per year.