Australia's Mineralogy and International Minerals have signed a memorandum of understanding to supply iron ore worth US$14.6 billion to China over the next 25 years.

The two companies signed the agreement to supply Chinese steel maker Wuhan Iron and Steel (Group) Co. with 12 million tons of iron ore a year from late 2007.

Once formally signed, the deal would be Australia's largest single iron ore export contract, the companies said.

Construction of the iron ore mine and plant would start next year, and the Australian Government had granted environmental approval for the project, they said.

The ore in the lease is considered low-grade, which has only about half the iron content of other deposits controlled by Australia's leading miners Rio Tinto and BHP Billiton.

However, the companies consider it viable as demand from China's fast-growing economy has been driving up iron ore prices.

China's steel production was expected to grow nearly 18 percent to 290 million tons in 2005, an Australia-based research center forecasted last month.

The country has recently overtaken Japan as the world's biggest importer of iron ore and now accounts for around one third of the world's sea-borne iron ore trade.

Global steel output rose 8.5 percent in the first eight months of this year, led by a 21 percent jump in China, the International Iron and Steel Institute said.

Source: Shenzhen Daily/Agencies