Banks back West Pilbara iron ore project

: Metals
14/11/18

Australia-based ANZ has agreed in principle to join with its Chinese banking counterpart CDB to help finance the West Pilbara iron ore project, which is being developed by Chinese steelmaker Baosteel and Australian rail provider Aurizon.

ANZ and CDB signed an initial deal yesterday, with Aurizon and Baosteel agreeing to co-operate on the potential development of the 30mn t/yr West Pilbara. It comes in the wake of the signing yesterday of a free trade agreement between Australia and China. It builds on a 2009 agreement between the two banks where ANZ helped CDB participate in the loan syndicate for the Newcastle Port Infrastructure Group, which operates one of the three terminals at Australia's largest coal port in New South Wales.

The future of the West Pilbara iron ore project had been looking doubtful with Aurizon last month appearing to back away from a 2016 deadline for an investment decision on the project. It told investors that it would only decide to invest in the project if the overall project economics are viable, all counterparties get credit security, take-or-pay contracts are executed for the mine's lifespan and project financing is completed without any recourse to Aurizon's balance sheet.

The financing agreement will help move the project forward, although the deal is not binding and needs to be tightened up to bolster confidence in the project, according to industry sources.

The price of 62pc Fe ore has fallen from $103.10 cfr China in early May, when Chinese steelmaker Baosteel first announced its $1.31bn bid for West Pilbara iron ore project owner Aquila Resources, to $73.40/t yesterday. The slump in prices is expected to continue, with UK-Australian iron ore producers like BHP Billiton and Rio Tinto vowing to push even more supply onto the oversupplied market.

The project aims to produce 30mn t/yr of iron ore in a first phase, which includes building a deepwater port at Anketell and a 280km rail line that can handle 40mn t/yr of iron ore from the project's eight mining areas. The project could be easily expanded, with the Western Australia state government estimating Anketell port could handle 350mn t/yr of iron ore exports.

Baosteel, South Korean mill Posco and US investment firm AMCI have offered Aurizon an exclusivity period until January 2016 to make a final investment decision for the port and rail facilities for West Pilbara. A Baosteel-Aurizon joint venture holds 50pc of the project, with AMCI and Posco holding the rest.

Baosteel gained the stake through its $1.31bn purchase this year of Aquila. Baosteel owns 85pc of Aquila, with Aurizon holding the rest.

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25/12/19

Chile to audit SQM-Codelco lithium deal

Sao Paulo, 19 December (Argus) — Chile's comptroller general office (CGR) will audit "certain operations associated with" the SQM-Codelco agreement to form a lithium production joint venture, following complaints by some of the country's parliamentarians and indigenous communities, further delaying the deal. CGR on 18 December said its scope is limited to verifying whether government actions follow the law and to audit public spending. The agency said that it is forbidden from judging whether a policy or administrative decision is a good idea or convenient. CGR does not have the power to veto the deal, because the main legal challenges to the agreement are either in court, where the watchdog has been ordered not to comment, have already been resolved by judges, or involve policy judgments that Chilean law does not allow CGR to review. As a result, its role is limited to reviewing the agreement for potential irregularities. It can flag legal inconsistencies and delay the deal's effective date until any identified issues are rectified. CGR's audit will focus on the state-owned company Codelco's financial advisory contract with investment bank Morgan Stanley, as well as Codelco's operations, to determine whether public resources are being used appropriately. The audit will also examine claims from a congressional investigative commission regarding the transparency of the negotiation process, SQM's tax situation, and a clause that relates to Codelco's obligation to sell 100pc of extracted potassium to SQM under the partnership. The Atacama desert's brines, from which the joint venture will produce lithium, contain potassium that is precipitated and extracted alongside lithium. Additionally, CGR will review whether the companies' directors acted lawfully and examine Chile's economic development agency Corfo's approval of the contracts that underpin the partnership. These include Corfo's contracts with SQM, which allow lithium extraction in the Atacama salt flats through December 31, 2030, and its contracts with Codelco's lithium subsidiary Minera Tarar, which enables operations at the site from 2031 to 2060. Corfo's mining lease and project contracts are a key legal step in allowing Codelco to partner with a private company — SQM, in this case — to mine lithium in that area under the national lithium strategy of President Gabriel Boric, who leaves office in March. Although the SQM-Codelco agreement , which was struck in May 2024 and would extend SQM's authorization to continue extracting lithium in the Atacama salt flats from January 2031 to 31 December 2060, does not have a hard deadline to close, it is still running against the clock. If the deal is not sealed by 31 December 2025, a contract clause in the partnership agreement allows any party to void the deal if they so choose. If this deadline is not met, Chile would also reduce SQM's lithium extraction quota by 300,000 metric tonnes of lithium carbonate equivalent for the remaining period until 31 December 2030, when the company's current mining permit ends. The joint-venture also faces opposition from Chile's newly elected president Jose Antonio Kast . The far-right politician said he would honor the deal if it is sealed before he takes office, but risk of an overturn would grow if that condition is not met before he is sworn in on 11 March 2026. By Pedro Consoli Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Mexico central bank cuts target rate to 7pc

25/12/19

Mexico central bank cuts target rate to 7pc

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Viewpoint: Al industry faces structural Europe decline

25/12/19

Viewpoint: Al industry faces structural Europe decline

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Viewpoint: Indonesia’s MHP surge to hit nickel prices

25/12/19

Viewpoint: Indonesia’s MHP surge to hit nickel prices

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US inflation slows to 2.7pc in November

25/12/18

US inflation slows to 2.7pc in November

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