Baosteel bids for equity in Australian enterprises

Baosteel Resources Australia Co., Ltd. has taken a major step in the Australian mining sector by partnering with Aurizon Co., Ltd. to acquire a stake in Aquila Resources Co., Ltd. This move marks one of the largest investments by Chinese companies in an underdeveloped iron ore project in recent years, challenging the dominance of BHP Billiton in the Australian iron ore export market. The deal is seen as a strategic effort to secure long-term supply for China’s steel industry and diversify sources of raw materials.

If the acquisition is finalized, and if Aquila Resources can prove that the West Pilbara Iron Ore Project (WPIO) is commercially viable, Baosteel could establish a new iron ore export operation in Australia. The project aims to supply Asian steel mills and is expected to start production between 2017 and 2018. With reserves exceeding 2 billion tons, WPIO ranks just behind the Roy Hill project, owned by billionaire Gina Rinehart, which has 2.4 billion tons in reserves and is set to begin operations in 2015.

The first phase of the WPIO project will produce around 30 million tons annually. While this is much smaller than the projected output from major players like Rio Tinto and BHP Billiton, the project has a unique advantage: it plans to build a new railway and port at Anketell Point. Unlike the existing infrastructure controlled by large mining companies, this new facility will be open to other miners, offering a crucial solution for projects that have been stalled due to transportation limitations. The port is designed to handle up to 300 million tons per year, making it a significant addition to the region’s logistics network.

The remaining shares of the WPIO project are held by AMCI and South Korea's Posco. Based on Posco’s 2010 purchase of a 24.5% stake, Aquila’s 50% share is estimated to be worth at least A$375 million. However, Aquila’s valuation may be significantly higher, as the company reported a nearly doubling of reserves since exploration began and secured all necessary environmental approvals. These factors make the project even more attractive to potential investors.

If the deal goes through, Baosteel Resources International will own up to 85% of Aquila, with the rest held by Aurizon. Although demand growth for Chinese steel and iron ore may slow, the overall volume remains substantial. This acquisition aligns with China’s long-term strategy to secure stable supply chains and reduce reliance on a few dominant global players. It also highlights the growing influence of Chinese companies in the global mining sector.