Asia's biggest iron ore deposit, with reserves of more than 3 billion metric tons, has been found in China's northeastern province of Liaoning, the China News Agency reported, citing the local government.
The Dataigou deposit, located near Benxi city, has both magnetite and hematite material with iron content of between 25 per cent and 62 per cent, the report said. Benxi government officials were not immediately available for comment.
The discovery may reduce China's dependence on imports from Vale, Rio Tinto and BHP Billiton. China, the biggest buyer of iron ore, has rejected a 33 per cent price cut accord offered by Rio this year and called for prices to drop as much as 45 per cent because of losses by its steelmakers.
''This could be a low-cost operation for Chinese supply,'' said Mark Pervan, a senior commodity strategist at ANZ in Melbourne. ''If they can reduce their reliance on high-cost iron ore imports and look for very low-cost domestic supply, that's very positive for domestic steel mills.''
Angang Steel, China's second-largest listed steelmaker, rose 4.9 per cent to 13.85 yuan in Shenzhen tradin. Baoshan Iron & Steel, the largest mill, rose 39 per cent to 7.20 yuan in Shanghai trading. Bengang Steel Plates Co. rose 7.7 per cent to HK$4.90 in Hong Kong trading.
Good for Angang
The find is ''very long term good news for Angang,'' Cazenove Asia said in a note to clients. ''Its parent already has the largest iron ore reserves in China, and this potentially doubles it.'' The mine could start in four years, the note said.
The reserves at Dataigou are equivalent to the combination of all the iron ore reserves in Liaoning's Anshan and Benxi areas, the report said.
Angang board secretary Fu Jihui and Benxi Iron and Steel Group's spokesman Liu Dahong said they didn't have any information regarding the new deposit.
The cited iron content figures for the deposit suggest it's ''a high grade discovery for China,'' ANZ's Pervan said. ''In global terms, that's not very high grade. Brazilian ore has a grade of between 65 per cent and 70 per cent.''
Mines in China typically have iron content of 20 per cent to 40 per cent, compared with over 60 per cent for production by Vale, Rio Tinto and BHP Billiton at their projects in Brazil and Australia. Rio and BHP each have about 5 billion tons of iron ore reserves at their mines, Pervan said.
China's reliance on iron ore imports may rise to 70 per cent this year from about half in previous years, the Shanghai Securities News reported yesterday, citing Sinosteel, the nation's biggest iron ore trader.
Imports have jumped because of the closure of high-cost domestic mines, Vale said in April. Mines that started after 2005 are mostly unprofitable, Zou Jian, former chairman of the China Metallurgical Mining Enterprise Association, said April 29. About one quarter to one third of mines in the country started before that period.
Chinese steelmakers have been ''using less domestic supply because the cost of domestic supply is rising quickly,'' ANZ's Pervan said.