Chinese company cements deal to buy Chilean iron ore mine

Translated by Brian Schwarz

Originally published December 30, 2009 in “El Mercurio” of Santiago, Chile (elmercurio.com) under the heading Empresa china concreta millonaria compra de mina de hierro en Chile by Franco Vera Mejías

VALLENAR, CHILE - Chinese company Shunde Rixin Development Co. (Rixin) this week acquired a 70 percent stake in the exploration rights to a Chilean iron ore deposit, located some 700 kilometers from Santiago near Vallenar. According to various Chinese and U.S. sources, the mine has mineral reserves of around 5 billion [metric] tons, making it the fifth largest in the world.

Chilean [mining] industry sources said the exploitation rights to the Chilean mine were sold by another Chinese company, and that the transaction value was less than $10 million. Nonetheless, the total cost of the project will reach a value to fluctuate between $1.9 billion and $2.2 billion, according to estimates given by Rixin president Li Zihao in a press release.

The Chinese state mining company Minmetals is also involved in the project. Yesterday the company announced that although it will not provide financial assistance, it will help in the sale of the mined iron ore, according to a report in the Wall Street Journal’s (WSJ) digital edition.

Price controls

According to the president of Rixon, the purchase of exploitation rights to the project, which should be in operation in 2012, is aimed at helping curb the foreign “monopoly” on the sale of iron ore.

WSJ reported that China has been making moves recently to break free from price controls set by Australian and Brazilian iron ore producers.

Rixin’s president has said that the mine – the name of which is still unknown – could supply China with 30 million tons of ore by 2012, and after 2014 [production] could reach 120 million tons annually.

Once operations begin, shipments of Chilean iron ore could reach 10 percent of all Chinese iron imports.

Shunde Rixin Development Co. is a private textile exporter, car trader and metals-mining company located in [China’s] Guangdong province.