MAC/20: Mines and Communities

"Come to Canada!"- mining executive urges Chinese

Published by MAC on 2009-11-02

An emerging Canadian company, Ironstone Resources, is actively seeking Chinese funding for a domestic iron ore mine, said to have more than a billion tonnes of resources, albeit grading at a low 34%.

If the deal goes ahead, this wouldn't by any means be the first time that a Chinese company has invested in a Canadian extractive outfit: two significant deals were brokered in June this year.

But, as was demonstrated year years back when Minmetals bid (unsuccessfully) for Noranda, some Canadians believe that Chinese intervention in their mining fields threatens the nation's health, labour and human rights standards.

In canvassing Canada's attractiveness to the Chinese, Ironstone's CFO, Jim Masleck, dismisses fears (real or imagined) that they would be unduly handicapped by having to follow these standards.

Instead, Mr Masleck points to the preferential tax rates and security of tenure that the foreign visitors would enjoy.

Canadian iron ore miner eyes Chinese investment - CFO

By Li Chunlan, Interfax China Metals & Mining

30 November 2009

While Chinese companies are keen to source overseas mineral resources, including copper and iron ore, to ease the country's shortages, many overseas companies with rich mineral resources are actively seeking out Chinese companies for cooperation. One such company is Canadian miner Ironstone Resources Ltd.

"We can sell the mining rights to all the deposits or if an interested Chinese party does not have an experienced management team to develop these deposits in Canada, we can set up a joint venture with them," Jim Masleck, chief financial officer of Ironstone Resources, told Interfax at the China Mining Congress and Expo 2009 held in Tianjin Municipality.

Ironstone Resource's iron ore deposits, namely the Worsley, Rambling Creek, North Whitemud and South Whitemud blocks, are located in the Clear Hills region of Canada's northwestern Alberta Province. These deposits cover a total area of 200,000 acres, and contain about 1.12 billion tons of iron ore resources, with an average iron grading of 34 percent.

The iron ore deposits also contain vanadium resources, grading at 0.22 percent, amounting to 2.5 million tons. There is also a coal deposit with 240 million tons of coal resources located nearby. The company expects to finish exploration work in the area before the end of this year and is awaiting investment to build production facilities.

"The reason we are looking at Chinese companies to invest in our iron ore deposits, is that China's economy is growing at a fast pace and we expect it will keep up its huge and stable demand for iron ore in the future," Masleck said.

In September 2009, China's iron ore imports hit a historic high of 64.55 million tons, up 65 percent year-on-year.

According to the company's Web site, it expects that global iron ore prices will be in an upward trend after tumbles in late 2008 and China will continue to increase its iron ore imports.

In response to concern from Chinese companies that investing in developed countries including Canada will be more costly than investing in developing countries, due to environmental requirements and higher labor costs, Masleck said Canada has a more mature investment environment than that of developing countries. "If you buy the mining rights to a mine in Canada, you can explore and mine in stability, but if you buy a mining right to a mine in a developing country such as the Republic of Zambia, it may not belong to you some day, as the political environment is not stable there."

Furthermore, Masleck said the Canadian government is encouraging foreign companies to invest in the development of the country's mineral resources, and are offering preferential tax rates to such enterprises.

"We have had talks with several Chinese companies for possible cooperation including Hong Kong Stock Exchange-listed Zhong An Real Estate Ltd., but have yet to make a decision," Huang Weiping, another senior employee from the company, told Interfax.

In regard to speculation that Canada is considering restricting Chinese companies from controlling major stakes in Canadian mineral companies, Huang said that at present there is no such policy, and generally speaking the country welcomes foreign investment for the exploration of its rich mineral resources.

"We have no preference as to whether potential investment comes from state-owned or privately-owned companies, as both have advantages and disadvantages. Chinese state-owned companies have strong financial backing, but will likely require more time to get governmental approvals. On the other hand, privately run companies will gain the green light from the government more quickly, but may be hindered by limited finances," Huang said.

In addition, Ironstone Resources plans to list on the Toronto Stock Exchange in 2010 to raise funds to develop its iron ore deposits, but it will depend on cooperation agreements with potential investors, Huang added.

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