Baosteel Trading Co Ltd, a subsidiary of Baosteel Group Corporation, yesterday signed an agreement with Australia Fortescue Metals Group Ltd (FMG) to jointly explore a mine in Western Australia that is expected to have 1 billion ton of magnetite deposits.

The project is likely to begin this year. Baosteel will fund the exploration of the area and the project's feasibility studies. FMG is responsible for providing land and getting approval from the government, Russell Scrimshaw, executive director of FMG, said yesterday.

"The exploration and feasibility studies are expected to take 15 to 20 months. Then the two companies will set up a 50-50 joint venture for technical investment and the entire project," said Scrimshaw. The magnetite produced will be shared between the two.

The exploration area is located in the Pilbara region of Western Australia, close to the Fortescue rail corridor between FMG's Cloud Break mine site and Port Hedland.

"Pilbara offers enormous potential for exploration of all types of minerals," said Scrimshaw.

The area's mineralization is described as predominately banded iron ore formation magnetite, and the annual capacity of crude mine material is expected to be 30 million tons, with the grade expected being 35 percent.

In March, Baosteel signed a 10-year iron ore off-take agreement to purchase up to 20 million tons per annum from FMG.

FMG is a new force in iron ore industry, with over 2.5 billion tons of resources, including 1.1 billion tons of reserves. The company has only developed 10 percent of its 40,000 square kilometers of tenements, the largest holding in Pilbara.

"The mine is expected to be put into production as early as next year and the annual capacity is expected to be 45 million tons," said Liu Xiaodong, general manager of China Business in FMG.

"We have signed contracts with top 10 steelmakers in China to sell 15 million tons of iron ore per year," he added.

"This is an important step for Baosteel to expand the company's steel productivity by exploring the overseas market," said Zhou Xizeng, an analyst at CITIC Securities.

(China Daily August 29 2007)