Hanlong Said to Talk to Wuhan on $4.7 Billion Sundance MineZijing Wu and Brett Foley
Sichuan Hanlong Group, an investor in highways and power projects, is in talks with Wuhan Iron & Steel Co. to help develop an iron ore project in West Africa owned by Australia’s Sundance Resources Ltd., two people with knowledge of the matter said.
Hanlong is seeking an investment from Wuhan Steel for the Mbalam project and is also in discussions with other Chinese state-owned companies, said the people, who asked not to be identified as the information is private. Perth-based Sundance has agreed to a takeover offer from Hanlong and estimates it needs $4.7 billion for Mbalam.
China is urging its companies to buy assets overseas and secure energy and commodity resources to meet domestic demand. The Mbalam iron ore project, straddling the border between Cameroon and Republic of Congo, has a planned annual capacity of 35 million metric tons of the steelmaking raw material.
Hanlong, which owns about 14 percent of Sundance and plans to buy the rest for A$1.14 billion ($1.2 billion), said last month it was considering partnerships with Chinese state-owned enterprises to develop Mbalam. Government-controlled Wuhan Steel is China’s fourth-largest steelmaker.
Sundance also plans to build a 510-kilometer (317-mile) railway line linking the Mbarga mine in Cameroon and the Nabeba mine in Congo to a deep-water export terminal on the coast of Cameroon, according to its website.
Hanlong has discussed construction of the railway link and port, mine development and offtake sales contracts with Chinese state-owned companies, it said in the Dec. 27 statement.
The Chengdu, China-based company’s takeover of Sundance was first agreed to in October 2011, before a plunge in iron ore prices prompted Hanlong to lower the bid. The companies last month extended the deadline for the acquisition after China Development Bank failed to agree on terms for a loan in time.
Sundance ended trading today at 37 cents in Sydney, 22 percent below Hanlong’s bid of 45 cents a share. Wuhan rose 0.4 percent to 2.81 yuan in Shanghai today.
Xiao Jinfa, a vice president of resource development at Wuhan Steel, declined to comment on a potential agreement, as did Hanlong’s press office and Paul Armstrong, an external spokesman for Sundance.