First two projects to receive JOGMEC’s support for iron ore exploration and development: financing provided for Sojitz Corporation’s “Southdown Magnetite Project” and Itochu Corporation’s “Roper Bar Project”
On March 30 2009, the Japan Oil, Gas and Metals National Corporation (JOGMEC), loaned Sojitz Corporation and Itochu Corporation a total of about 1.1 billion yen for their iron ore exploration projects in Australia.
These projects are the first to be financed under JOGMEC’s Iron Ore Exploration and Development Support Program, which was established pursuant to the government’s second economic stimulus package, announced in October 2008.
1. Iron ore, the primary raw material for steel production, experienced a significant price increase last year due mainly to worldwide supply shortages. The government realized the need to secure a stable supply of iron ore to Japan in this situation and stipulated the enhancement of support for exploration and development of iron ore and other minerals in its second economic stimulus package, announced in October 2008.
2. In line with this government policy, the Ministry of Economy, Trade and Industry (METI) has just started a new program to support iron ore exploration and development through JOGMEC. JOGMEC, which has been assisting Japanese companies in projects to explore and develop overseas mining of nonferrous metallic minerals (e.g., rare metals and base metals), launched the program in February 2009 by adding iron ore to its list of minerals eligible for support.
3. Subsequently, Sojitz Corporation and Itochu Corporation applied for financing under the program. JOGMEC examined their applications and loaned the two companies about 1.1 billion yen in total, on March 30, 2009.
The two companies’ projects are the first to obtain financing under the program and are expected to effectively contribute to securing a stable supply of iron ore to Japan by creating more diversity in the supply sources.
4. In an effort to secure a stable supply of iron ore, METI will continue to use this and other support programs for the purpose of financing Japanese companies’ projects to explore and develop iron ore mines overseas.
Outline of the projects awarded financing
(a) Southdown Magnetite Project
- Location: southwest region of Western Australia, Australia
- Company name: Sojitz Corporation
- Loan amount: 940 million yen (to be repaid over 15 years, at an interest rate of 1. 4%)
- The loan is provided for Sojitz Corporation to cover the cost of acquiring a 30% interest in the project from local company Grange Resources through Sojitz Resources & Technologies Pty Ltd. (SRT), the local subsidiary of Sojitz, as well as the cost of iron ore exploration by the subsidiary.
- With relatively large possible reserves (about 1 billion tons) of iron ore existing in the area, the project is expected to contribute to increasing iron ore production and diversifying Japan’s iron ore supply sources.
(b) Roper Bar Project
- Location: Northern Territory, Australia
- Company name: Itochu Corporation
- Loan amount: 150 million yen (to be repaid over seven years, at an interest rate of 0. 8%)
- The loan is provided for Itochu Corporation to cover the cost of acquiring a 15% interest in the project from local company Western Desert Resources (WDR) through IMEA Exploration & Development of Australia Pty Ltd. (IEDA), the local affiliate of Itochu, as well as the cost of iron ore exploration by the affiliate. (By bearing part of the cost of exploration over the specified period, IEDA will be able to gain up to a 51% equity in the project.)
- This is the first iron ore project conducted in the Northern Territory, a highly promising region for resource development, with the participation of a Japanese company, and it is expected to contribute to diversifying Japan’s iron ore supply sources.
March 30, 2009
Division in Charge
Iron and Steel Division, Manufacturing Industries Bureau