Territory Resources Ltd., the Australian iron-ore producer backed by Noble Group Ltd., is mulling over the acquisition of a second mine to supply steel mills in China, the world’s biggest user of iron ore.
“We have a vision to acquire a second mine,” Andrew Simpson, chairman of the Perth-based company, said in an interview, adding the company is reviewing possible opportunities. “We need funding and lender support.”
Territory, 26.5 percent owned by Hong Kong-based commodities supplier Noble, is seeking to boost output from its Francis Creek mine by 25 percent this year. OZ Minerals Ltd. said yesterday the drop in economic growth rates in China is close to bottoming.
“This news is hugely positive for the stock,” Chris Weston, institutional dealer at IG Markets in Melbourne, said today by phone. “Given that they are 26 percent-owned by a stronger overseas-based company, they have the potential fire power to make the acquisitions and increase their exports to China.”
“We’ve got support out of Hong Kong,” Simpson said. “If we come up with the right project within this town and overseas, we would get the backing.”
Territory is studying acquisitions of early-stage deposits and more advanced projects, which require funding, he said.
The company expects to complete sales agreements with three Chinese mills within two months, Simpson said. The accords cover sales of 2 million metric tons of iron ore over three years and will be set at annual benchmark contract prices, he said.
The accords, secured with the assistance of sales partner Noble and first announced last month, are with “major” Chinese mills within the top 15 producers, he said.
Iron-ore contract prices may drop 40 percent this year, ending six years of gains, Goldman Sachs JBWere Pty said last month. Chinese steelmakers, the world’s largest buyers of iron ore, are demanding cuts of between 40 percent and 50 percent in annual price negotiations between mills and producers. The talks may take another four months to settle, Citigroup Inc. has said.
Source: Bloomberg
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