Benxi Steel Plans to Join in Exploration of Iron Ore Deposit

By Bloomberg News

June 26 (Bloomberg) -- Benxi Iron & Steel Group plans to join in the exploration and development work on an iron ore deposit, touted as Asia’s largest, in China’s Liaoning province.

The group hasn’t obtained exploration or mining rights for the discovery, located 20 kilometers (12.4 miles) from the company in Benxi, listed unit Bengang Steel Plates Co., said today in a statement to the Shenzhen stock exchange. The group can’t verify claims that the deposit has reserves of more than 3 billion metric tons, it said in the statement.

China, the biggest buyer of iron ore, wants to lift domestic output to reduce imports from Vale SA, Rio Tinto Group and BHP Billiton Ltd. The Dataigou find in the northeastern Chinese province is deeper than any domestic mines in production, according to Zou Jian, a consultant and former chairman of the China Metallurgical Mining Enterprise Association.

“It would take at least a few years for the deposit to start production,” said Zhu Limin, an analyst with Shanghai Securities Co. “The deposit is too deep underground to be an ideal mine resource for the mills.”

The Benxi local government this week announced the find after an exploration team drilled 17 holes in the area. The deposit may have 3 billion tons of iron ore, and material was found from 1.2 kilometers below ground to 2.015 kilometers, it said in a statement.

Angang Steel

Anshan Iron & Steel Group and listed unit Angang Steel Co. haven’t considered exploring or investing in the deposit, the unit said yesterday in a statement. Anshan and Benxi could be given the right to develop the project, the Guangzhou Daily reported yesterday.

Separately, Bengang Steel also said it may have a first- half net loss of 400 million yuan ($59 million) to 900 million yuan. The shares jumped 9.2 percent to 8.17 yuan today in Shenzhen at 11:29 a.m. local time.

“The forecast interim loss is in line within market expectations,” said Zhu. “Bengang surged today because it’s cheaper than many other mills.”

The stock has almost doubled this year, lagging behind the 139 percent gain in rival Xinjiang Ba Yi Iron & Steel Co. Gansu Jiu Steel Group Hongxing Iron & Steel Co. almost tripled this year.

Chinese steel stocks have surged this year on optimism the nation’s stimulus spending plan will revive demand and prices.

--Helen Yuan. Editors: Tan Hwee Ann, Ang Bee Lin

To contact the Bloomberg News staff on this story: Helen Yuan in Shanghai at hyuan@bloomberg.net