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Mills deny links to new ore find

TWO northeast China-based mills denied yesterday of having links to a newly discovered huge iron ore deposit near their home base after their shares surged on Wednesday amid talk they could benefit from the find.

The China News Service, citing the local provincial government, reported on Wednesday a mine with proved reserves of over 3 billion tons -- the largest in Asia --- had been founded in Liaoning's Benxi. Other news reports later said Benxi Iron and Steel Group held a 20 percent stake in that deposit and could inject the assets to its listed arm.

Its Shenzhen-listed unit, Bengang Steel Plates Co yesterday denied the Benxi Group had a stake, but said the parent may participate in initial exploration and development in the project in partnership with other investors.

Bengang ruled out any mining asset injection to happen over the next three months at least.

Another Shenzhen-listed Liaoning-based mill, Angang Steel Co, also said yesterday that neither it nor its parent had any knowledge about the mine and they have no plan to invest.

Analysts have said the economic viability of the mine is in doubt. The deposit, with iron content ranging from 62 percent to a relatively unattractive 25 percent, is 1.2 kilometers to 2 kilometers beneath the ground.

"We believe production costs could be higher than average given the depth of the ore," Merrill Lynch analyst Frank Zhang wrote in a note.

A CLSA report said the mine will unlikely come on stream until 2015, indicating there's no immediate catalyst to the domestic steel industry.

Separately, Bengang forecast a first-half net loss of 400 million yuan (US$58.6 million) to 900 million yuan, versus a net profit of 160 million yuan a year earlier. Angang estimated a half-year net loss of up to 2.99 billion yuan on slumping demand and steel prices.

Bengang, which soared 10 percent on Wednesday, again surged by the daily cap yesterday even after the clarification. Angang, which rose 7.42 percent on Wednesday, fell 2 percent to 13.69 yuan yesterday. Both were suspended from trading on Thursday.


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