Home > Investments, Market change > Guinea set to seal fresh iron ore deal

Guinea set to seal fresh iron ore deal

May 11, 2010

“Guinea expects in the coming weeks to announce another significant iron ore deal to follow Vale’s $2.5bn acquisition in the west African country, with Chinese investors considered the frontrunners.
Mahmoud Thiam, mining minister, told the Financial Times that he hoped a new joint venture involving Bellzone, an Aim-listed junior miner that says it has a ‘non-binding memorandum of understanding … with a Chinese enterprise’ to exploit its prized Guinean concession, will be announced within a month.

Iron ore has become the hottest of commodities amid voracious Chinese demand and following radical changes in March to the way big miners sell to steelmakers that allowed prices to soar. West Africa – home to some of the largest untapped stocks but also renowned for its volatility – is attracting feverish attention.
‘The [Vale] mine would turn us into the third-largest iron ore exporter in a five to six-year period,’ Mr Thiam said. ‘If the Bellzone mine comes online it will turn us into the largest iron ore exporter if both mines are going full throttle within 10 years.’

Source: Financial Times, May 10 2010

Observations:

  • The (Australian) company will try to set up the mine with $0.9 bln own funds, investing in infrastructure with $2.6 bln Chinese money.
  • The upcoming deal with a Chinese company fits in a continuing trend of Chinese investments in Africa to secure long term natural resource supply.

Implications:

  • The mining market landscape is changing: more and more companies are competing for resources in remote areas that are not in the traditional heartlands of mining, like Guinea. The geographical production base in 20 years time will be significantly different from the current situation.
  • Chinese mining & production companies will grow stronger and stronger in the mining business, as they hold a competitive advantage in securing the funds required to invest in projects like in Guinea.
Advertisements