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China is poised to make its biggest direct investment in the Australian iron ore industry after winning Canberra’s blessing for a deal worth up to $7 billion to develop Clive Palmer’s Fortescue magnetite project in the Pilbara.Chemeq admits breaches
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China cleared to take big stake in Palmer project



JOHN PHACEAS



China is poised to make its biggest direct investment in the Australian iron ore industry after winning Canberra’s blessing for a deal worth up to $7 billion to develop Clive Palmer’s Fortescue magnetite project in the Pilbara.
Henry Fan, managing director of Hong Kong-based Citic Pacific, told WestBusiness that Australia’s Foreign Investment Review Board had yesterday approved the company’s proposed investment in the project at Cape Preston.
The company now has five days to pay $US215 million ($294 million) for the initial rights to develop Australia’s biggest magnetite project under a deal struck with Mr Palmer in March.
“I’m pleased to inform you we received FIRB approval earlier today and we are proceeding with completion as agreed,” Mr Fan said.
Run by billionaire Larry Yung, son of former Chinese premier Rong Yiren, Citic Pacific is a listed conglomerate that is 29 per cent owned by mainland China’s biggest overseas investment group.
The group’s first move into the upstream iron ore industry comes amid anger in Beijing over recent iron ore price increases, fuelling Chinese efforts to secure direct control over foreign iron ore supplies.
The deal with Mr Palmer grants Citic Pacific rights to six billion tonnes of magnetite resources at the Fortescue project.
Citic Pacific must pay a further $US200 million by July 2008 to secure its second billion tonnes, and has options to acquire another four billion tonnes in $US200 million tranches.
Mr Palmer’s Mineralogy group will also receive royalties worth up to $600 million a year once all six billion tonnes are under development.
Mr Palmer said the FIRB approval was a landmark for WA’s fledgling magnetite industry, with the first two stages of development alone slated to cost $US1.37 billion and $US1.1 billion respectively.
“The total deal is worth about $7 billion . . . while the exports from just one project will be worth about $1 billion a year,” he said.
Mr Palmer said Citic Pacific would move quickly on development, and might start construction of stage one later this year ahead of first production in 2010.
The project is subject to an existing State Agreement for a seven million tonnes-a-year mine and pellet plant, which allows for the export of both concentrate, pellets and direct reduced iron. It also has been granted environmental approvals and native title clearances.



Push: China seeks ore supply control.