Wuhan Iron and Steel Group (WISCO) has made significant investments in overseas iron ore assets as part of its strategy to secure long-term raw material supply. The assets being injected into the company include domestic mines, foreign mining operations, shares in international mineral companies, and participation in several Weilara projects in Australia, where WISCO has partnered with BHP Billiton.
Among these, the domestic mines—Daye, Chengchao, and Jinshandian—are key components of WISCO’s domestic portfolio. However, these mines are nearing depletion. Daye, one of China’s oldest iron ore mines with a history dating back over a thousand years, was designated an exhausted city by the State Council. Despite recent claims of new discoveries, its reserves remain limited, with only 15.6 million tons of recoverable ore out of 1.97 billion tons total. At a production rate of 3 million tons per year, it can only sustain operations for about five years.
Chengchao and Jinshandian also face similar challenges. Chengchao holds 1.4 billion tons of reserves, but only 85 million tons are economically recoverable. Jinshandian, on the other hand, has even smaller reserves, totaling just 72.5 million tons. These figures highlight the urgency behind WISCO’s push for overseas investment, particularly since 2008.
In addition to domestic assets, WISCO has invested heavily in foreign mineral companies. Its largest overseas stake is in MMX, a Brazilian mining firm. Initially, WISCO aimed to be an active operator, but due to capital constraints and other priorities, it shifted to a more passive role. As a result, its investment in MMX has lost significant value, with the stock price dropping from 5.42 reais to 2.23 reais—a decline of nearly 60%. This has severely impacted the valuation of WISCO’s overseas holdings.
Other foreign investments include shares in Canadian companies like Adriana Resources and Century Irons, as well as Australian firm CXM. While these were valued at around 2 billion yuan in the initial assessment, their current market value is estimated to be less than 860 million yuan. This discrepancy underscores the risks associated with overseas investments in volatile markets.
WISCO’s most ambitious overseas venture involves iron ore projects in Liberia, Canada, and Australia. These include large-scale projects such as the Bolivian Iron Project in Liberia, which aims to produce 1 million tons annually, with follow-up projects planned for 2015. In Australia, WISCO holds a 60% stake in Aier Iron Mine and 60% in Attikamagen, while in Canada, it owns 25% in Bloomlake and 40% in Sunnylake. However, most of these projects are still in early development stages, requiring years of exploration and capital investment before they become profitable.
Despite the high valuations assigned to these projects in internal reports, many remain speculative. The lack of detailed data on recoverable reserves and future production plans makes it difficult to assess their true value. Moreover, the time required to bring these projects online—often over five years—adds to the uncertainty.
In summary, while WISCO has secured substantial overseas mineral assets, the majority of these are still in early stages or face significant operational and financial challenges. The company's current valuation of these assets at around 7.5 billion yuan appears optimistic, given the current market conditions and the uncertain prospects of many of these projects.
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