Mitsubishi Corp on Monday upped the stakes in the escalating scramble for resources in Australia, agreeing with Australian iron ore producer Murchison Metals to jointly spend more than A$3bn ($2.53bn) to launch in Western Australia what will be the largest-ever iron ore development project headed by a Japanese company, reports Nikkei Net Interactive (subscription only).
Australia is the world’s biggest exporter of iron ore and supplies 60 per cent of Japan’s imports. Big Chinese steelmakers such as Shanghai Baosteel Group have begun investing in the development of Australian iron ore mines while Posco, South Korea’s largest steelmaker, is also strengthening ties with the mining companies, Nikkei said.
Demand for iron ore has risen as steelmakers make more steel sheets and bars to meet rising demand for the metal led by China, Bloomberg reported.
A 50-50 joint venture between Mitsubishi’s Australian unit, Mitsubishi Development, and Murchison Metals will develop an iron mine, a railway and a harbour from 2009, Nikkei said.
The venture is expected to annually produce and export a total of 26m tons of iron ore, an amount equivalent to about 20 per cent of Japan’s annual imports of the material, to Japan and other countries, possibly as early as 2011. Construction of infrastructure for the project, including a harbour along the west coast capable of accommodating 150,000-ton class vessels and a 420km railway linking the harbour and the mine, will begin in 2009.
South Korea’s largest steelmaker, Posco, has purchased rights to a certain portion of the shipments, and Mitsubishi will have exclusive sales rights for the remainder. The project will be partly financed with loans from financial institutions.
Mitsubishi will be the exclusive sales agent for all the iron ore, excluding supply to certain customers, reported Bloomberg. Mitsubishi will pay A$150m on completion of the joint venture agreements and make a residual payment based on an agreed valuation of the Jack Hills project after completion of a feasibility study, according to Mitsubishi.