Mitsubishi, Chinese may rescue Australia iron ore and portplan


  MELBOURNE Nov 22 (Reuters) - Mitsubishi Corp and Chinese investors may save troubled multi-billion-dollar iron ore and deepwater port-cum-rail projects in Western Australia, analysts said on Tuesday, after the partner of Japan's top trading company looked set to exit the projects.

Mitsubishi's partner, Murchison Metals, said this week it aims to complete discussions by Wednesday on the sale of its 50 percent stakes in the A$5.9 billion Oakajee port and rail project and the A$3.7 billion Jack Hills iron ore project.

Murchison has been looking to sell because it has had difficulty raising its share of the funding for the Oakajee project and for Jack Hills, both of which have turned out to be more costly than first thought.

Analysts in Tokyo said they expect Mitsubishi to buy out Murchison and then sell stakes to new partners, adding that Mitsubishi would look to cut its exposure to the Oakajee and Jack Hills projects to less than 400 billion yen ($5.2 billion).

Two Chinese companies, seen as potential backers for the key rail line and port, are state-owned Sinosteel and Angang Steel Co (Ansteel) , which have interests in the midwest iron ore region in Western Australia.

Mitsubishi and Murchison declined to comment. Sinosteel and Angang couldn't be reached immediately for comments.



Western Australia is eager to see Oakajee built and has been calling for Chinese involvement to get the project moving.

State premier Colin Barnett met in September with China's National Development and Reform Commission, the agency in charge of investment approvals, looking to drum up potential Chinese participation, Murchison said last month.

"I think what we are seeing now is what I have been waiting for sometime and that's a rearranging of the ownership structure of the Oakajee port and rail," Barnett told reporters on Tuesday. "That is important for the project to go ahead."

He said he is looking for the port and mine development to be separated.

"What we're interested in doing is getting a good corporate structure in place, whether it's Japanese, Chinese, Australian or anyone else that can actually undertake this project and fund it," Barnett said.

Analysts said it was too difficult to estimate how much Murchison may fetch for its stakes in the iron ore and infrastructure projects, because neither project is viable without the other.

"The lack of customers makes the Oakajee port and rail project difficult," said Chris Drew, an analyst at RBC Capital Markets.



Murchison's shares, on a trading halt since Monday, were last at A$0.275, valuing the company at A$121.7 million. It has lost nearly 80 percent of its value this year amid doubts about the future of its two main assets.

The Oakajee port and rail project was designed to open a second major iron ore province in Australia to challenge the dominance of global giants Rio Tinto and BHP Billiton .

Sinosteel's Weld Range iron ore project was expected to use the Oakajee rail and port, but it put the mine development on hold earlier this year due to the setbacks facing the Oakajee port and rail line.

Ansteel's interest in the project is tied to its 30 percent stake in Gindalbie Metals, the third potential user of Oakajee.

Any sale of the Oakajee and Jack Hills stakes will need approval from Murchison's shareholders, including South Korean steelmaker POSCO.

($1 = 1.019 Australian dollars, 76.980 Japanese yen) (Additional reporting by Yuko Inoue in TOKYO; Reporting by Sonali Paul; Editing by Muralikumar Anantharaman)

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