A long-delayed Chinese mining acquisition in west Africa has moved a step closer to completion with the approval of an iron ore project that is central to the deal.
Shares in Sundance Resources, the Australia-listed miner that China’s Hanlong first proposed buying in 2011, jumped 14 per cent on Monday after it said the Republic of Congo had granted it a permit to build an iron ore mine.
Sundance said the awarding of the permit meant it had satisfied all conditions necessary for the deal. Hanlong plans to complete the acquisition of Sundance by March 1, according to Xinhua, China’s official news agency.
The acquisition has been held up by wrangling over the price of the deal as well as by the Chinese company’s difficulty in lining up financing.
Hanlong in August revised its offer price for Sundance to 45 Australian cents per share, 21 per cent lower than its original offer, after iron ore prices fell to their lowest in almost three years because of waning Chinese demand.
Since then, though, Chinese growth has recovered and iron ore prices have surged 60 per cent.
Questions remain over financing for the deal. Hanlong, a privately held company with about $2.5bn in annual revenues, expects to invest $5bn in developing the Mbalam iron ore mine, which lies on the border of the Republic of Congo and Cameroon.
Hanlong “is in talks with leading state firms to jointly develop the mine”, Xinhua reported.
There was no mention of whether China Development Bank, a government-run lender that has provided support for overseas resources acquisitions in the past, would back this deal.
Hanlong had previously said it expected to receive financing from CDB, but the two failed to agree loan terms by a deadline earlier this month.
Sundance chief executive Giulio Casello said in a statement that the Congo permit would clear the way for work to start on the iron ore mine “once financing is confirmed”.
The acquisition, which has been approved by Australian and Chinese authorities, could give China a little more sway over the global pricing of iron ore, the main commodity used in steelmaking.
China makes half the world’s steel but is heavily reliant on imports of iron ore produced by BHP Billiton, Rio Tinto and Vale, the three leading global miners.