Materials, extraction

$700m Russo-Chinese Transbaikalia iron ore complex gets official go ahead

14 Jan '11
Oleg Kouzbit, Online News Managing Editor

After almost six years of uncertainty China’s Xiyang is moving forward with its $660-730m iron ore mining and processing project in Russia’s Southern Siberia. Tapping the ore-rich Berezovskoye deposit in Transbaikalia, the Chinese expect to produce up to 6 million tons of foundry goods a year and sell billets on both sides of the Russo-Chinese border.

Russia’s Luneng, a 100% mining subsidiary of China’s Xiyang Group, has finalized plans to develop a $660-730m ore mining and processing project in the south-eastern part of Transbaikalia (Southern Siberia next to the Russo-Chinese border), almost six years after the firm won a tender to develop the huge Berezovskoye iron ore deposit in the area.

The future Russian ore mining and processing factory will have a projected capacity of 6 million tons of foundry goods a year. It will reportedly break ground by the end of this year when Luneng expects to complete exploration work. When the factory will be operational has yet to be set.

The company will also engage in construction of related industrial/transportation and social infrastructure, in which it will actively collaborate with the Transbaikalia regional administration, according to official reports.

The investor

Xiyang Group is one of China’s largest flux, steel and aluminum makers with 23 years of experience in the field. Its current market for magnesium-based flux is a reported 80 corporate customers around the world.

Over the past few years the firm has already pumped $27m into the development of the 220 sq. km Berezovskoye deposit, the investor said. The deposit is a prized asset for Xiyang, Luneng added, since its explored reserves are estimated to be around a reported 747 million tons of siderite and limonite ore. According to Chinese data, average iron content is up to 50%.

Reducing labor costs the Chinese way

The complex is expected to create up to 1,000 new jobs in this economically depressed region of Russia. The question still unanswered, though, is who will be employed at the future factory. In 2009, Xiyang Group said the core workforce would be Chinese workers to minimize the cost of ore production. Under the most recent plan, Russians will also be employed; but the firm has not indicated exact numbers.

What is clear is that the firm will start building temporary housing for workers later this year already with a target date of 2013 for completion of necessary infrastructure.

Pioneering new technology

According to the company, the Berezovskoye factory will incorporate the world’s newest technology of using non-coking coal to smelt cast iron from powdered ore, which the firm will import from Australia’s AusIron. This technology does not require ore to be concentrated—only powdering is required.

The primary markets for the end products, 90x90 to 150x150mm sized cast iron billets, will be Russia and China, the Xiyang management said.

Cheap to ship, costly to make

The new complex will be located just 8km away from the Chinese border and 20km from a river port, making shipping finished goods a logistics managers dream. While transportation costs will be bargain basement, producing the ore will not. Chinese experts acknowledge that production costs will be high because of the high silica content in Berezovskoye ore that will require expensive processing techniques.

Nevertheless, analysts are far from bearish. The project is part of a long-term, 2009-2018 Russo-Chinese cooperation program for China’s North-East and Russia’s Siberia and Far East, and given positive examples of thriving Chinese operations in this country (like a polymetallic project in the neighboring Tyva region widely supported by local authorities) observers feel Xiyang’s new venture will be successful.
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Locations: Transbaikalia

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