Australian iron ore prospector Fortescue Metals Group Ltd. said on Thursday it had revamped a supply agreement with Chinese steelmaker Tangshan Iron and Steel Group that increases volumes.
Tangshan, which had already agreed to take up to 5 million tonnes of ore a year from Fortescue’s western Australian mines, has committed to purchase up to a further 15 million tonnes annually under a second stage development plan, Fortescue said.
Fortescue’s shares, which had been on a trading halt pending the announcement, surged 7.5 percent on resuming trade to a record A$36.01.
The agreement between Fortescue and Tangshan, China’s second largest steel maker, comes as Chinese companies push aggressively into Australia’s mining industry, driven by huge demand for raw materials to feed a booming economy.
A number of Chinese companies have taken stakes in Australian miners of iron ore, bauxite, uranium and other metals, offering cash for drilling and exploration in return for a supply of the material.
The increased take-up by Tangshan hinges on Fortescue increasing its annual output beyond its proposed 45 million tonnes a year, the company said.
Fortescue has also signed supply agreements with China’s Baosteel and other steel mills, and holds contracts exceeding 45 million tonnes of ore annually.
Tangshan had said last year it was interested in investing in overseas iron ore mines. It plans to have a crude steel capacity of 30 million tonnes by 2010, up from 16 million in 2005. ($1=A$1.21 )
Information from: Reuters