June 24 (Bloomberg) -- Asia’s biggest iron ore deposit, with reserves of more than 3 billion metric tons, was found in China’s northern province of Liaoning, according to a local government.
The Dataigou deposit, located near Benxi city, has material with iron content of between 25 percent and 62 percent, the Benxi government said in an e-mailed statement, confirming a China News Agency report. Deposits were found from 1.2 kilometers (0.7 miles) below ground to 2.015 kilometers.
China, the biggest buyer of iron ore, wants to lift output to reduce imports from Vale SA, Rio Tinto Group and BHP Billiton Ltd. The deposit is deeper than any Chinese mines in production, according to Zou Jian, a consultant and former chairman of the China Metallurgical Mining Enterprise Association.
“Production costs for this mine could be high because the deposit is very deep,” said Hu Kai, an analyst at Umetal Research Institute. “It can’t compete with Australian imports, which are cheaper because they have higher grades and are above ground.”
Angang Steel Co., China’s second-largest listed steelmaker, rose 7.4 percent to close at 14.18 yuan in Shenzhen today. Baoshan Iron & Steel Co., the largest mill, rose 3 percent to 7.20 yuan in Shanghai. Bengang Steel Plates Co. rose 10 percent, the daily limit, to 7.48 yuan in Shenzhen.
Angang Benefits
The find is “very long term good news for Angang,” Cazenove Asia Ltd. said in a note to clients. “Its parent already has the largest iron ore reserves in China, and this potentially doubles it.” The mine could start in four years, the note said.
The Anben Steel Group, parent of Angang and Benxi Iron & Steel Group, is the nearest steelmaker to the deposit, Zou said. Still, “it’s up to the central government to decide on whether to allow Anben to develop the mine,” he said.
Angang board secretary Fu Jihui and Benxi Iron and Steel Group’s spokesman Liu Dahong said they didn’t have any information regarding the new deposit.
The deposit, which contains both magnetite and hematite ore, is equivalent to the combination of all the iron ore reserves in Liaoning’s Anshan and Benxi areas, today’s statement said.
The exploration team drilled 17 holes, of which 12 found iron ore. The area covered was about 4 kilometers in length and 3 kilometers in width, the statement said.
Higher Grade
Chinese underground deposits are typically between 500 meters and 600 meters deep, consultant Zou said. Mines in China have iron content of 20 percent to 40 percent, compared with over 60 percent for production by Vale, Rio Tinto and BHP Billiton at their projects in Brazil and Australia.
The cited iron content figures for the deposit suggest it’s “a high grade discovery for China,” Mark Pervan, a senior commodity strategist at Australia & New Zealand Banking Group Ltd., said in Melbourne.
“In global terms, that’s not very high grade. Brazilian ore has a grade of between 65 percent and 70 percent,” Pervan said. “But if they can reduce their reliance on high-cost iron ore imports and look for very low-cost domestic supply, that’s very positive for domestic steel mills.”
Foreign Imports
China has rejected a 33 percent price cut accord offered by Rio this year on contract iron ore and called for prices to drop as much as 45 percent because of losses by its steelmakers.
The nation’s reliance on iron ore imports may rise to 70 percent this year from about half in previous years, the Shanghai Securities News reported yesterday, citing Sinosteel Corp., the nation’s biggest iron ore trader.
Imports have jumped because of the closure of high-cost domestic mines, Vale said in April. Mines that started after 2005 are mostly unprofitable, China Metallurgical’s Zou said April 29. About one quarter to one third of mines in the country started before that period.
