Baosteel to buy 15% of Aquila

Baosteel, China¡¯s largest steelmaker, plans to invest A$286m (US$241.2m) for a 15 per cent stake in Aquila Resources, an Australian iron ore and coal company, in a deal that underlines the country¡¯s deepening interest in Australian iron ore assets. Baosteel said the Aquila purchase was its first large strategic investment in a foreign public company. The deal, pending regulatory approvals both in Australia and China, will help Baosteel become the second largest shareholder in Aquila. "Baosteel may get several million tons of iron ore annually from the deal, but it is still miniscule when compared to its huge overall imports. So in real terms the impact is relatively small," he said, adding that the move may prompt more Chinese steelmakers to acquire stakes in overseas mining firms. Aquila said it has enough reserves to annually mine 32.5 million tons of iron ore, with production expected to begin in mid-2013. Aquila's deposits lie in the West Pilbara iron ore belt, home to the massive mining operations of Rio Tinto and BHP Billiton, the world's second- and third-largest producers of iron ore. Shares of Baosteel dropped 3.77 percent to close at 6.9 yuan in Shanghai on Friday. Baosteel will also have a preferential opportunity to directly invest in and co-develop most of Aquila's projects, according to an Aquila statement on Thursday. It also said that Dai Zhihao, vice-president, Baosteel, has been nominated to the Aquila Board.