Major Chinese banks back Eyre Peninsula iron ore project
IRON Road has attracted formal expressions of interest from three major Chinese banks to fund its $US4 billion Eyre Peninsula iron ore and infrastructure project.
IRON Road has attracted formal expressions of interest from three major Chinese banks to fund its $US4 billion Eyre Peninsula iron ore and infrastructure project.
The company’s managing director Andrew Stocks said it was a major milestone for the project, which the company hopes to make a final investment decision on by the end of this year or early next year.
The banks involved are China Development Bank (CDB), Industrial and Commercial Bank of China (ICBC) and China Construction Bank (CCB), with the debt component of the project worth $US3 billion.
Iron Road also has China Railway Group involved in the Central Eyre Iron Project (CEIP) as a project development partner.
Mr Stocks said the receipt of formal debt-financing expression of interest letters followed meetings with the banks in Beijing, Shanghai and Sydney during February and April.
Mr Stocks said CDB focused on projects which aligned with China’s priorities with an emphasis on infrastructure.
“And ICBC and CCB are both commercial banks and are the largest and second-largest banks in the world,’’ he said.
“So when you put those three together I think it makes a formidable team.’’
Mr Stocks said the company would progress towards FID with work continuing on major project approvals and debt and equity financing before going to the board for final approval.
The company is aiming to finance the project with 70-75 per cent debt in the project and the rest equity, with China Railway Group and major international pension funds being considered for the equity component.
Mr Stocks said China Railway would tip in about $150 million in equity pending FID.
“We’re talking to a consortium of international pension funds that also wish to participate in the equity pool,’’ he said.
China Railway group (CREC) already has an agreement to take 10 million tonnes of ore per year should the project go ahead.
“We believe CREC’s 10Mtpa of high quality iron concentrate offtake, proposed equity investment at both the Iron Road and CEIP levels, together with the provision of a project completion guarantee, is driving the banks’ strong support and appetite to lend,’’ Mr Stocks said.
The CEIP would produce 21.5 million tonnes of ore per year for more than 25 years and development would involve a mine as well as rail and port infrastructure.
“Adding impetus to strengthening equity finance interest is acknowledgment that high quality iron ore is increasingly being sought by a consolidating Chinese steel industry to better manage rising environmental challenges and tighter regulatory standards,’’ the company said.
“Although the overall rate of growth in seaborne iron ore demand has slowed in response to steadying Chinese crude steel production, projected demand growth for high quality products such as CEIP iron concentrate remains buoyant.
“Key to this is the declining output trend in Chinese domestic iron concentrate supply. High quality Chinese iron concentrate and analogous imported products play a crucial role for steel producers in balancing out sub-benchmark grade ores and blending desired blast furnace feedstock.’’
Iron Road shares closed more than 14 per cent higher at 28c.