Inside a storage base belonging to a subsidiary of Hebei Steel

June 24 -- Hebei Iron and Steel (000709) signed agreements with Australian-listed miner, Richmond Mining, and its wholly-owned subsidiary in the U.S., Nevada Iron, to jointly explore the Buena Vista Iron Ore Mine in Nevada, reports China Business News.

Richmond Mining specializes in the acquisition and exploration of mining assets in Australia and the U.S.. It conducts its business mainly in the western part of Australia.

According to Richmond Mining, the Buena Vista Mine has total magnetite reserves of 400 million tons and is close to railways and ports.

Hebei Steel will obtain a stake of 80 of Buena Vista Mine’s output in the next 10 years and has the right of first refusal on the remaining 20 percent stake, on the condition that it can successfully help Richmond Mining obtain financing of $161 million for the exploration, according to the agreements.

After the financing is completed, Hebei Steel will have the right to buy 6.25 million shares in Richmond Mining at A$0.4 per share, and obtain stock options of an equivalent amount. The exercise price of the options is A$0.6 per share.

Hebei Steel will be able to appoint a director to the board of Richmond Mining once its stake exceeds 15 percent.

Max Nind, director and general manager of Richmond Mining, said the Buena Vista Mine is scheduled to start operation in the fourth quarter of 2012.

Hebei Steel is currently the largest steelmaker in China and is one of the top three in the world in terms of steel production volume.

Hebei Steel had iron ore self-sufficiency ratio of just 20 percent in 2010. According to company chairman, Wang Renhong, Hebei Iron and Steel is aiming to increase its output of iron ore by five million tons annually in order to reduce its dependence on external sources of iron ore.

Wang said the steelmaker is targeting iron ore self-sufficiency ratio of 35 percent by the end of the 12th Five-Year Plan period.