russia enters the resourcehouse mix

Full article from AFR.....sounds promising....Particularly as Citic Pacific approaches production just next door.

Russia Enters the Resourcehouse mix
page 51 AFR 2/11/22 - Perry Williams AFR

Australia’s most colourful mining magnate, Clive Palmer has widened his hunt for funds beyond China after approaching a Russian trading house for a $650 million investment in a bid to resuscitate a stalled iron ore project in Western Australia.

Mr Palmer is hoping to rejuvenate the $3.3 billion Balmoral South development in the Pilbara from the wreckage of his failed $US3.6 billion Resourcehouse initial public offering in Hong Kong earlier this year. Balmoral South is being developed by Australasian Resources, 68 per cent owned by Mr Palmer, and was included as a major feature of the Resourcehouse float.

In a pitch last month to several trading houses including an unnamed Russian party, Mr Palmer is understood to have increased the amount Australasian is seeking to $650 million from the original $600 million, adding that the investment would pay itself back after just two years. He told potential investors Australasian had developed a package for a trading company which would require $650 million in exchange for a 25 per cent share of profits. The trading house investment would complement a promised $3 billion in credit funding from Chinese banks.

Russian companies in the frame for the investment could include Evraz and Magnitogorsk Iron and Steel. Evras was in the Cape Lambert iron ore project and Magnitogorsk has a stake in Fortescue Metals Group while other Russia-based groups like Severstal are also thought to be mulling Australian investments. Talks with potential Russian investors highlight how Mr Palmer is looking beyond the usual array of Chinese banks who are already contributing to investment in Balmoral South.

Mr Palmer has previously talked up his strong links with some of China’s largest banks and resources companies. As part of the October meetings, Mr Palmer told several trading houses an added off take component would further enhance their investment returns. “We were told we would receive a good margin on the off take which would give a full payback within two years,” said a source close to the discussions. The source added that under the proposal, any up-front investment would potentially be minimal given the early stage of the development, with construction not due to start for a further six months.

Australasian told investors as part of its recent quarterly report that two parties were reviewing the “project metrics” of Balmoral South and it remained confident about the viability of the development and the long term outlook for the global iron ore market. The mining entrepreneur agreed a deal in September where his privately owned company Mineralogy handed Australasian the mining rights to double the amount of ore it could explore from Balmoral South. As part of that arrangement,

Australasian is looking to raise $1.1 billion to complement a promised $3 billion in credit funding from Chinese banks, split between a $600 million injection from a “major trading house” and a $500 million of high yield notes from Royal Bank of Scotland.
The Balmoral South project would use port infrastructure being built by CITIC Pacific as part of its Sino Iron development at Cape Preston, which relies on tenements controlled by Mr Palmer as part of a 2007 deal. Australasian has previously said construction of Balmoral South is due to start in 2012 with initial output ramping up from 2015 and full commercial production due in 2017.

Earlier this year Mr Palmer said he expected to start receiving about $500 million a year in royalties from the Sino Iron iron-ore project in WA, which he sold to Citic Pacific in 2007, and planned to plunge much of those funds back into development of his own project. The two projects also share China Metallurgical Group Corporation as a contractor, adding to synergies, according to Mr Palmer.

In June Resourcehouse chairman Dominic Martino, who also chairs Australasian Resources , said continuing deterioration in global market conditions let it to pull its proposed US$ 3.6 billion listing in Hong Kong. The Resourcehouse board decided not to proceed after advisers gave it feedback from institutional investors suggesting lowering the capitalisation by more than $US 1 billion and the price per share by up to 30 per cent. It marked the fourth time the Resourcehouse float had been cancelled.