Behind the success of Chonggang’s overseas acquisition of Australian Ore

This is one of the best conditions for Chinese companies in the overseas mining industry. It is also one of the few projects in which Chinese companies have actually invested in the substantial operation of the Australian iron ore field. It is even more significant for specimens. The successful operation provided many lessons for Chinese companies to purchase resource projects overseas.

On the morning of December 2nd, at the Istanzin magnetite mine in Western Australia, with the deputy mayor of Chongqing Municipal Government Ling Yueming personally handing in the auspicious red earth donated by local indigenous people to the Guangyu Mining Area, Chongqing Iron and Steel Yistan Xinshan Magnetite Project Formally announced the start of construction. This indicates that Chongqing's largest overseas investment project has entered a substantive stage of construction.

The survey resources of the Chongqing Iron and Steel Ore Project are 1.668 billion tons. The forecasted long-term resource reserves exceed 3.7 billion tons and can be mined for over 100 years. The average ore grade of the ore is 39.4%. After the beneficiation, the iron concentrate grade will reach over 67%. The total project investment is near. 3 billion U.S. dollars.

“Heisei Steel made a visionary decision. For Australia, the Iraqi Yishan Xinshan magnetite is a high-grade, long-term rich mine.” Ian Blayney, representative of the State of Western Australia, praised the start-up site. Heavy steel decision-making.

The significance of this project is not limited to this. This is the best condition for Chinese companies in the overseas mining industry, and it is also the few projects that Chinese companies have actually put into substantive operation in the Australian iron ore field in recent years. First, the significance of the specimens is that the successful operation of this project has provided many lessons for Chinese companies to purchase resource projects overseas.

Get rid of the monopoly of iron ore prices

“The implementation of the project will solve Chongqing Iron and Steel Group’s largest industrial company, Chongqing Iron and Steel Group’s demand for iron ore resources, and form a new economic growth point; Chongqing will further expand and expand the level of opening up and implement a 'go global' strategy. To create inland open highlands and make active contributions."

Time back two years ago.

From the beginning of June 2009, after consulting with Morgan Stanley Consulting Co., Ltd., Chongqing Heavy Steel Group united with Chongqing Foreign Economic and Trade Group, and Qianlong Group acquired the wholly-owned subsidiary of Asian Steel Holding Co. The company conducted exchange consultations.

On July 7, 2009, both parties signed a memorandum of cooperation. Subsequently, Chongjing hired technical, legal, financial, and other consultants to conduct due diligence and organized a delegation to Australia for site visits.

In November 2009, Chongqing Heavy Steel Mining Development Investment Co., Ltd. was formally established to invest in Asian Steel. On November 7, 2009, after several rounds of negotiations, the two parties formally signed a strategic cooperation framework agreement for the Australian iron ore project in Chongqing, and Chongqing Steel Minerals Development and Investment Co., Ltd. invested 280 million Australian dollars in the consideration, and won 60% of Asia Steel Holdings Limited. Equity.

This means that after the equity is delivered, Chongqing Iron & Steel will participate in the development of all of the mineral products owned by the Asian Steel Group in Australia and sell and purchase the mineral resources produced by these projects in accordance with their shareholdings.

Among them, Asian Steel is located in the Iraqi Istan Xinshan iron ore project in Western Australia. It is the first project jointly developed by the Heavy Steel Group after its cooperation. It plans to start production in 2012 and will produce a magnetite concentrate with an annual output of 10 million tons. To solve the problem of heavy steel mines. On February 5, 2010, Chongqing Steel’s application for shareholding and development was approved by the Australian Foreign Investment Review Board. On May 11, 2010, the final agreement for the current round of acquisition was formally signed in Hong Kong and the deadline for delivery was agreed. On June 13, 2010, the project was approved by the National Development and Reform Commission.

“Over 8 million tons of iron ore needed for heavy steel production in one year, 80% of which come from overseas purchases.” A person in charge of the Propaganda Department of Heavy Steel Group told this reporter that overseas iron ore prices have been rising all the way in recent years. The highest price is more than US$200/ton, and the low price is also US$100/ton. The heavy steel costs in Australia are only US$50 per ton from mining, plus the freight from Australia to Chongqing is only US$80 per ton. After calculating, the acquisition of Australian mines by Chongqing Iron and Steel will save up to US$120 per ton of iron ore. In the long run, this will be a key step for domestic steel companies to gradually emerge from the monopoly of international iron ore prices.

It is understood that the heavy-duty iron ore project of the Iraqi Istan Xinshan Iron Mine in Western Australia will be constructed in three phases. The first phase will be put into operation at the end of 2013 and will eventually form an annual output of 30 million tons of iron ore concentrate. It not only broke the resource bottleneck problem of the development of heavy steel, only iron ore will increase profits by nearly 10 billion yuan each year.

At the same time as acquiring the Australian mine, Chongzhou also signed a contract with the government of Jingjiang City, Jiangsu Province, investing 1.3 billion yuan to build a transit base for iron ore and steel.

It is reported that the reason why the transfer base was determined to be in Jingjiang, in addition to the strong local support, Jingjiang's superior shoreline conditions also attracted heavy steel. According to the plan, Chongqing Steel will occupy about 688 meters of the Yangtze River shoreline and 800 to 1,000 meters of the shoreline of the Inner Harbour of Jiaokou Port. After the Jingjiang iron ore transfer base is completed, it will turn around 12 million tons of iron ore and 3 million tons of steel plates.

“After taking the mine transported, planning a transit base on the eastern coast can promote the largest advantageous effect of overseas iron ore projects on heavy steel,” said the person in charge of the propaganda department of the above-mentioned heavy steel group.

“The Chongqing Iron and Steel Ore Project is the largest foreign investment project ever undertaken by Chongqing Municipality. The implementation of the project will address Chongqing Iron and Steel Group’s largest industrial company, Chongqing Iron & Steel Group’s demand for iron ore resources, and form a new economic growth point; The Chongqing Municipal Government will further enhance the level of opening up, implement the 'go global' strategy, and make positive contributions to open upland inland, said Ling Yueming at the ceremony.

The secret of success

"The timing, the precise positioning and flexible strategies are indispensable."

Going to buy minerals abroad! Since the international financial crisis, domestic companies have set off an upsurge of overseas gold rushes, especially overseas types of mineral deposits have become the object of China’s funds chasing.

However, the overseas acquisition of minerals has not been smooth. China Minmetals, Chinalco and other giants have repeatedly fought against overseas mergers and acquisitions. However, the top 20 steel companies that are ranked among the nation’s steel companies have successfully acquired minerals overseas.

In fact, before the heavy steel shot, there have been a number of domestic steel companies have had contact with the mine.

“Before Chonggang, it was the Minmetals Group. We talked about each other for about two years, but there has been no substantial progress.” Cui Jian, Director of the Chongqing State-owned Assets Supervision and Administration Commission, told this reporter that when Heavy Steel planned to acquire the Iraqi Iron and Steel After the matter of mineral rights was reported to the National Development and Reform Commission, it took a lot of work. Because the National Development and Reform Commission is aware that Minmetals has been in contact with the mine as a central enterprise.

“Later, the leaders of Chongqing led the team to the Minmetals lobby. The mayor of Chongqing, Huang Qifan, also wrote a letter specifically to the relevant person in charge of Minmetals, which ultimately contributed to the transaction of heavy steel.” Cui Jian said that if Minmetals is concerned, if the acquisition is successful It is only a lot of resources, but for Chongqing Steel, this is a key move to change the long-term subject to “outside”, and it is of natural significance to the long-term development of Chonggang.

"Of course, this also reflects the support of Minmetals as a central state-owned enterprise for local state-owned enterprises and the municipal government's support and sincerity," said Cui Jian.

In fact, Minmetals is not yet the first Chinese company to focus on the mine. Prior to Minmetals, there were companies such as Shougang and Wuhan Iron and Steel who had contact with the mine one after another, but did not proceed due to various reasons.

"There are many reasons, such as Minmetals. The entire negotiation process has a long period. The other party believes that it has a large impact on its due debts and is unwilling to wait. Another important reason is that some large domestic companies want 100%. Holding the mine, this makes it difficult for the other party to accept. After all, in the long run, holding shares can have the greatest benefit.” Chongqing SASAC sources told this reporter.

In addition, according to him, another important reason is that the cooperation between the Chongqing Iron and Steel Group and the other party has retained the conditions for the counterparty to be assigned to the chief financial officer, allowing the other party to see the “sincerity” of Chonggang’s long-term cooperation and common development with each other.

"The timing, its own precise positioning and flexible strategies are indispensable," said a person in charge of the Chongqing State-owned Assets Supervision and Administration Commission.