Atlas Iron Ltd., the Australian iron ore producer that started shipping to China last year, is visiting steel mills there for talks to raise funds for its planned A$3 billion ($2.2 billion) Ridley project.
“There is a deal to be done, it is just a case of working through it,” Managing Director David Flanagan said today by phone from China, where company executives are meeting 12 groups, mostly steel mills, whom he didn’t identify. Atlas would prefer to retain a 25 percent to 30 percent stake as well as management of Ridley and may also sell shares to a partner, he said.
China’s 4 trillion-yuan ($586 million) stimulus package has already driven investment back to pre-crisis levels, fueled rebounds in electricity and steel output, and restored consumer confidence, the World Bank said last month. Atlas completed an initial study of the project last month and aims to find a partner by the end of the year, Flanagan said.
“Some of these mills are right now investing in growing their production two and threefold over the next year,” said Flanagan. “Definitely there is confidence here and people are investing real money in real growth.”
The company estimates the Ridley project could produce 15 million metric tons of ore concentrate over 30 years. Last month’s study estimated average annual earnings before interest, tax, depreciation and amortization of A$535 million, it said.
The Ridley project is located 75 kilometres (47 miles) east of Port Hedland in Western Australia. Atlas is studying shipment options because of constraints at Port Hedland. The company’s preference is to develop Ridley with a partner through a joint venture, Flanagan said.
“We have met a couple of big groups, one of them would be a top-10 group,” said Flanagan, adding the company will also hold talks in Taiwan. “We are not presenting Ridley to all of the groups, we are here to talk to our iron ore customers as well.”
Chinese steel mills are likely to be interested in the project, Bank of America-Merrill Lynch analysts led by Mike Harrowell said in a May 1 report. Cash prices for iron ore will bottom this quarter as demand from China rebounds, Goldman Sachs JBWere Pty analysts said in a May 1 report.
Source: Bloomberg
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