Baosteel and Aurizon Look to Kickstart $10b Stalled Project with Takeover Offer
The $10 billion West Pilbara Iron Ore project that was delayed may get new life as Baosteel, China’s largest steelmaker, and Australian rail operator Aurizon plan to buy the project’s major stakeholder, Aquila Resources, an Australian ore and coal company.
Baosteel and Aurizon offered $1.42 billion to buy Aquila Resources, which owns 50 percent of the West Pilbara Iron Ore project. Acquiring Aquila would give the pair half of the stake in the major ore mine, port, and rail project in Western Australia. According to reports, Aquila has formed an independent committee to study the proposal.
Analysts are saying that Baosteel has been trying to obtain iron ore resources for a while. The prices have lowered so it may be the right time for the Chinese steelmaker to starting buying up resources.
The development of the giant iron ore project slowed after prices fell. According to Bloomberg, Baosteel Resources, which held shares in Aquila since 2009, was frustrated at the delays with the project. Baosteel believes the West Pilbara Iron Ore Project would work even with iron ore prices as low as U.S. $80 per tonne.
“We’ve become frustrated, so what we’re going to do now is to get things started,” Wu Yiming, chief financial officer of Baosteel Resources International Co., told Bloomberg.
Since the announcement, shares in Aquila had their biggest gain in six years, closing at $3.34.
The West Pilbara Iron Ore project is a substantial iron ore export operation proposed for the Pilbara region of Western Australia. Development is still in Stage 1 of the project, which is based on pisolite iron ore deposits located 30 km to 85 km south west of Pannawonica. There is potential for considerable growth in subsequent stages as exploration is extended across the extensive tenement portfolio in the Pilbara.
Stage 1 of the West Pilbara Iron Ore project’s lifespan is anticipated to be 16 years. The site would employ a 3,500 person construction workforce and a 1,000 person operations workforce. The mine is expected to produce 30,000 tonnes of iron ore per year.