BC Iron Ltd., the Australian iron ore miner, said it has received offers from Chinese and Indian steelmakers to invest in its Pilbara project to help pay for the initial production costs.
BC Iron needs about A$30 million ($US20 million) to start output at the Nullagine project, about 60 kilometres (37 miles) from Fortescue Metals Group’s Chichester Ranges operations, Managing Director Mike Young said today.
“The Chinese are still looking for assets,” Young said, declining to provide details of the talks. “Interest in Australia iron ore hasn’t let up despite the general sentiment in the market.”
In November the Perth-based company, with $5 million in cash and no debt, cut its initial production forecast by half to 1.5 million tons a year in response to the global financial crisis and falling demand for iron ore from China.
A lower production target would reduce start-up costs by as much as 70 percent, Young said.
BC Iron signed a memorandum of understanding with Fortescue, Australia’s third-biggest producer of iron ore, 18 months ago to share Fortescue’s rail network in the Pilbara, which connects its Cloud Break site with Port Hedland. The memorandum is non-binding.
BC Iron may use trucks to transport ore from the site to Port Hedland should it fail to reach an agreement with Fortescue, Young said. Transport costs by road have halved in the past year due to declining fuel prices and a higher availability of trucks, he said.
“None of the hurdles we face now are different to the ones we faced before the downturn,” Young said. “In the next couple of months, we’ll try to finalize an agreement with Fortescue.”
Source: Bloomberg Australia
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