China to push for more Oz iron ore assets

China is set to accelerate investment in iron ore projects in Australia, the world's biggest exporter, despite the collapse of its deal to buy stakes in mines owned by Rio Tinto Group.

Rio last week scrapped a planned $19.5 billion deal with Aluminum Corp of China, known as Chinalco, in favor of a share sale and iron ore venture with BHP Billiton Ltd.

"The opportunities for Chinese groups to come in and facilitate development of some of the smaller players are definitely going to start picking up pace," said Eric Lilford, head of Australia mining at Deloitte Corporate Finance.

Australia has A$26 billion ($21 billion) of proposed new iron ore mines, according to government estimates.

Aurox Resources, Grange Resources and Atlas Iron may attract increased investment from China, according to Ord Minnett, an affiliate of JPMorgan Chase & Co.

"We won't see this trend stopping or being deterred by Chinalco's rejection because these companies are trying to get sustained supplies with stable prices," said Zhou Xizeng, a Beijing-based analyst at CITIC Securities Co. "Chinese companies have been successful in forming alliances with Australian junior miners."

A total of 33 "less advanced" iron ore projects, with an estimated cost of A$26 billion, are planned, the Australian Bureau of Resources and Agricultural Economics said in a report last month. Many are lower-grade, magnetite ore projects including Atlas Iron's A$3 billion Ridley project and Grange's $1.6 billion Southdown project.

Magnetite needs greater processing than higher-grade hematite ore, which accounts for about 96 percent of Australia's output, according to Gindalbie Metals Ltd.

"The Chinese love magnetite so I'm sure they are going to push into the magnetite space big time," Peter Arden, a resource analyst at Ord Minnett, said.

Questions:

1. What was the company that Chinalco had planned to invest in until most recently when the deal was broken?

2. How much was the deal worth?

3. What was one analyst’s expectation of Chinese companies response to the recent broken deal?

Answers:

1. Rio Tinto.

2. $19.5billion.

3. To invest in more smaller ore operations.