Hebei Iron & Steel Group, China’s biggest producer, will spend C$194 million ($195 million) to buy a stake in Alderon Iron Ore Corp. (ADV) and invest in a venture with the Canadian company as it seeks raw-material resources.
Hebei will buy 25.8 million shares of Vancouver-based Alderon, or about 19.9 percent, for C$3.42 apiece in a private sale, the Chinese company said today in a statement. Another C$105.7 million will be invested in a venture to win the right to acquire 25 percent of Alderon’s Kami project, Hebei said.
Chinese steelmakers, which import more than half of the nation’s iron ore requirement, are scouring the globe for ore and coal assets after a surge in raw material prices squeezed profit margins to the smallest among all industries in the country. Hebei Steel (000709) expects to obtain as much as 8 billion metric tons of iron ore resources by 2015, the official Xinhua News Agency reported in August.
The accord with Alderon was signed this morning, Hebei Deputy General Manager Tian Zhiping said today by phone. Bank of America Merrill Lynch is Hebei’s main adviser on the deal, according to the statement.
Hebei Iron & Steel Co., the listed unit, gained 1 percent to close at 3.02 yuan, beating a 0.4 percent gain in the benchmark Shanghai Composite Index. Alderon fell 1.7 percent to close at C$3.44 yesterday in Toronto.
Hebei agreed to buy 60 percent of the annual output, or as much as 4.8 million tons, of ore concentrate from the Kami project after the mine starts operation, according to the statement. The Kami project is located next to the mining towns of Wabush, Labrador City and Fermont, according to the Alderon website.
China in March pared the nation’s growth target to 7.5 percent this year from 8 percent in place since 2005, a signal that the government is determined to cut reliance on exports and capital spending in favor of consumption. The nation added about 10 new blast furnaces in the last six months, market researcher Custeel.com said today.
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