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## posco / murchison metals article! (the australi

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    Korean giant takes slice of Murchison
    Robin Bromby
    September 03, 2005
    EMERGING iron ore producer Murchison Metals has become the latest beneficiary of the scramble by Asian steel makers to get a foothold in the Australian iron ore business.

    South Korean steel giant Posco is following its Chinese and Japanese counterparts in gaining a seat at the table of their main suppliers in a deal which will give it a directorship once it hits the target 19.9 per cent holding.

    Murchison executive chairman Paul Kopejtka said Posco spent six months investigating Murchison's iron ore deposits in Western Australia before committing itself.

    "When the South Koreans do due diligence, they do due diligence," he said.

    Posco, formerly Pohang Iron & Steel, will take an initial 5.5 per cent of Murchison. The news pushed Murchison up 1.5c to 40c.

    The South Koreans have paid $3 million for 10 million shares and 30 million options at an exercise price of 50c. Posco can move to 12 per cent after exercising the options, but the extra shares to move to 19.9 per cent (and a director's chair) would have to be bought on-market -- a factor that will underpin Murchison's share price.

    Posco has also secured the right to buy up to 10 million tonnes a year over 25 years from Murchison.

    The size of the initial deal is not as important as the thinking behind it.

    It is a further signal that Asian steel makers are seeking equity roles in as many iron ore suppliers as they can, a mission that gained extra urgency when the three majors -- BHP Billiton, Rio Tinto and Brazil's CVRD -- forced them to pay an extra 71.5 per cent for their iron ore this year.

    China is a joint venture partner with Rio Tinto at the Channar mine in the Pilbara while BHP carved off 40 per cent of its Jimblebar project for four Chinese steel mills. China's largest steel maker, Sinosteel, has sewn up all production at the Koolanooka and Weld Range deposits by financing development of these Midwest Corp projects.

    Shougang Steel has taken a 50 per cent stake in Mt Gibson Iron's Extension Hill deposit.

    Posco's move into Murchison came a week after it held a ceremony in Perth to celebrate new 10-year contracts with Rio Tinto and BHP, with those companies supplying 128 million tonnes and 125 million tonnes respectively over the lives of the new deals.

    Murchison owns the Jacks Hill iron ore deposit east of Meekatharra in Western Australia.

    It is a high-grade deposit -- averaging above 62 per cent -- and first production is due within the first three months of 2006.

    The company will ramp up to nearly 2 million tonnes a year, trucking the ore 540km to Geraldton. As it moves to the next stage, which will see 25 million tonnes a year produced, Murchison will build its own rail line to Geraldton.

    © The Australian

    Korean giant takes slice of Murchison


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