Chapter 308: One General's Glory Built on Countless Bones
Every year, Haigang Steel imported tens of millions of tons of iron ore, primarily depending on BHP Billiton and Rio Tinto as their main suppliers.
After experiencing nearly two years of iron ore price negotiations, Lu Chenyi increasingly felt that in this seller's market, allowing BHP Billiton and Rio Tinto to dictate market rules and set prices posed an enormous risk for steel companies like theirs.
Moreover, as a leading domestic steel enterprise, how could Haigang Steel possibly tolerate being dictated by foreign companies?
Seeking additional iron ore sources had already become a priority on their agenda.
Apart from Australia and Brazil, there were also some iron ore supplies from South Africa, but these had minimal influence on the international iron ore market landscape.
If a domestically controlled iron ore enterprise like Lianying Mining could counterbalance giants like Rio Tinto and BHP Billiton, could it weaken their pricing power to a certain extent?
Furthermore, if Haigang Steel could acquire shares or even gain a controlling stake in Lianying Mining, creating a self-sufficient, vertically integrated industry, they would completely escape the exploitation of BHP Billiton and Rio Tinto.
Clearly, the 2.3 billion tons of high-quality iron ore reserves held by Lianying Mining were extremely enticing.
Moreover, Lianying Mining's current market capitalization wasn't excessively high; even with its rising stock price, it was only around 1 billion Australian dollars.
Right now, the only obstacle was Li Tang's approval.
Li Tang looked toward Niu Fu and Li Xingchao, silently seeking their opinion.
"We have indeed discussed potential cooperation with Chairman Lu beforehand," Niu Fu admitted openly to Li Tang. "The funds required by Lianying Mining for iron ore project development, as well as the subsequent sales, transportation, and handling, are all areas in which Wu Mining Group or Shenxia Group possess the capability and resources to invest. However, rationally speaking, Haigang Steel has significantly more experience in iron ore mining and trading."
"So what exactly do you mean?" Li Tang asked directly.
"It means we're open to cooperation with Haigang Steel for joint development of Lianying Mining's iron ore assets," Li Xingchao clarified straightforwardly. "Of course, if you disagree, we could also find ways to develop the project independently."
"Personally, I think Haigang Steel's involvement would bring more advantages than disadvantages in the long run," Niu Fu openly stated in front of Li Tang and Lu Chenyi. "It's not that we lack capability in developing iron ore projects, but both Wu Mining Group and Shenxia Group are currently heavily committed to developing the Talego Copper-Gold Mine. Our current resources—personnel, capital, etc.—are primarily directed toward the copper-gold project."
"Coal prices have surged to 270 yuan per ton this year, rising just as significantly as iron ore," Li Xingchao looked at Li Tang. "We've recently been studying the development of the Talego coal deposit. The preliminary plan involves building a railway approximately 100 kilometers long from the copper-gold mine to the coal mining area. Additionally, previous designs for power plants and water facilities might need to be expanded to meet the simultaneous requirements of both mines."
"Our original investment budget was 15 billion yuan, but after recent revisions, it's expected to exceed 20 billion yuan or even reach 30 billion yuan," Niu Fu added.
"That's a substantial investment!" Li Xingchao was not concerned, but rather energized.
Given current market conditions, such investment appeared increasingly valuable.
Zhongcheng Mining's mine development project had consistently been overseen by Qin Jianshe.
"The revised designs are almost complete," Niu Fu explained further. "Since you were abroad recently, we intended to inform you after completion. As the founder and chairman of Zhongcheng Mining, the final approval rests with you."
Li Tang wasn't upset by this independence. He himself had deliberately delegated operational authority within Zhongcheng Mining. Moreover, he was no longer the largest shareholder, and these project developments fell within his expectations.
"All this is to say, partnering with Haigang Steel seems like a sensible direction," Li Xingchao smiled toward Lu Chenyi, who nodded in return.
Li Tang understood clearly their implication. Simultaneously carrying out multiple mega-scale mining projects significantly increased risk and made it difficult to manage resources effectively.
"So, your opinion is favorable?" Li Tang asked to confirm.
"We're open-minded," Niu Fu refused to give a definitive stance. "Ultimately, you're the decision-maker; it's your call."
He then casually sipped his tea, effectively passing the responsibility onto Li Tang.
Their statements subtly conveyed another message: Wu Mining Group and Shenxia Group had heavily invested in the Talego copper-gold project, leaving limited resources for the Australian iron ore project. Clearly, after internal evaluations, they had decided investing in copper-gold mines was safer and potentially more profitable compared to iron ore.
They held more leverage in Mongolia, given China's critical importance in its mineral exports, whereas Australia's iron ore trade was unpredictable and susceptible to international dynamics.
"Oh, and there's more news worth sharing," Niu Fu put down his teacup and told Li Tang. "Freeport's Grasberg copper-gold mine in Indonesia recently experienced a cave-in incident, partially halting operations for rectification. This will significantly impact global production. Last year, there was already a copper supply shortfall of approximately 300,000 tons globally, driving international copper prices upward. We predict this gap will widen this year to between 800,000 to one million tons."
This implied global copper shortages would intensify, causing copper prices to rise further.
Li Tang nodded in agreement. "The future outlook for copper mining is indeed promising."
"Rapid infrastructure projects and booming high-tech industries have greatly increased copper demand, not just domestically but also internationally. The U.S. and Europe have been steadily recovering economically, maintaining growing demand for various raw materials," Niu Fu noted confidently.
Li Tang could tell that Wu Mining Group had firmly decided to concentrate their business on copper. They had no immediate plans to enter steel production, and their trade division currently engaged in importing iron ore purely for resale, without any strong desire to become involved directly in iron ore mining.
Both iron and copper were poised to be highly profitable sectors for years to come. There wasn't necessarily a right or wrong decision here.
Li Tang turned to Lu Chenyi, asking, "Chairman Lu, are you looking to acquire all my shares in Lianying Mining?"
"If you're open to it, we can slowly discuss the price," Lu Chenyi knew that with Niu Fu and Li Xingchao staying neutral, controlling Lianying Mining depended entirely on Li Tang's agreement.
Li Tang considered carefully before responding. Instead of outright rejecting or accepting the offer, he replied cautiously, "Cooperation between Lianying Mining and Haigang Steel will undoubtedly be mutually beneficial."
"You're absolutely right!" Lu Chenyi promptly agreed.
"But I don't think it's wise for you to acquire all my shares outright, nor would it be beneficial for Lianying Mining's development," Li Tang added thoughtfully.
"Oh?" Lu Chenyi seemed slightly surprised. "You doubt our management capabilities once we take control?"
"Haigang Steel is a state-owned enterprise. Lianying Mining currently controls around 50,000 square kilometers of land and 2.3 billion tons of premium iron ore reserves."
"That's common knowledge."
"Such significant resources would hardly gain easy approval from Australia's Foreign Investment Review Board if controlled entirely by Haigang Steel," Li Tang explained clearly.
"You seem to understand Australia's investment policies very well," Lu Chenyi remarked, confident he was equally familiar with Australia's investment environment.
"With iron ore markets improving and Lianying Mining's stock price continuously rising, many Australians are already expressing discontent. Some media outlets have started suggesting our investments in the Pilbara region might be part of a larger conspiracy," Li Tang explained, based on Alice's earlier briefings. "As a private enterprise, our investments are viewed purely as business transactions under Australia's free trade principles. However, if Haigang Steel—a major state-owned enterprise—takes control, it will inevitably trigger massive public controversy."
"How can you be so certain of this outcome?" Lu Chenyi questioned skeptically, wary of such hypothetical predictions.
But Li Tang knew historically that state-owned enterprises acquiring significant mining resources abroad typically encountered intense scrutiny and public opposition, often leading to failed acquisitions. Given Lianying Mining's rapidly rising profile in Australia, any takeover by a Chinese state-owned giant would unquestionably provoke backlash.
Without elaborating further, Li Tang stated firmly, "We can definitely cooperate, and Haigang Steel can invest, but it's unnecessary for you to hold a controlling stake."
"You seem very confident in your management team," Lu Chenyi smiled.
"Lianying Mining already has a highly professional elite team," Li Tang modestly deflected personal praise.
"Then how would you suggest we best cooperate?" Lu Chenyi looked at Li Tang with great interest.
"Lianying Mining is currently preparing a financing plan, but before financing, we first need to discuss supply contracts with domestic steel companies," Li Tang revealed his clear strategy. "Securing long-term supply agreements is essential for the successful development of our mines."
"You prefer we sign a supply contract first?" Lu Chenyi understood Li Tang's logic clearly.
"Yes," Li Tang confirmed confidently, knowing this initial step was vital.
Lu Chenyi decisively announced, "Alright, let's sign a ten-year contract for twenty million tons annually."
Li Tang was momentarily stunned by this massive commitment but quickly regained composure. Such a major contract would guarantee Lianying Mining's future success, ensuring demand and stability.
"Chairman Lu, you've made an incredibly wise decision!" Li Tang said sincerely.
"Our iron ore demand can easily nurture an international giant," Lu Chenyi laughed confidently. "We believe in Lianying Mining, and we believe in you, Li Tang."
"Thank you, Chairman Lu," Li Tang responded warmly, filled with confidence.
Having secured a ten-year, 200-million-ton iron ore contract from Lu Chenyi, Li Tang now firmly believed that Lianying Mining's rise to becoming a global iron ore giant was all but guaranteed.
Before this moment, even though he anticipated that the iron ore market would remain prosperous in the future, he had still felt somewhat uncertain deep down, mainly because he lacked sufficient funds for the enormous initial investment required for mine construction.
"This partnership approach was my second choice," Lu Chenyi openly admitted, speaking candidly and sincerely. "Our ideal scenario was to directly acquire all your shares in Lianying Mining. But since you seem reluctant to transfer your equity, we've settled for signing a supply contract."
"Chairman Lu is truly generous and far-sighted," Li Tang replied with a warm smile.
"Also, signing a supply contract is one thing, but when you initiate your financing plan, if the terms are favorable, Haigang Steel would still be keen on investing in Lianying Mining. Ideally, we'd like an equity stake sufficient to gain a seat on the board," Lu Chenyi clarified his intentions.
Clearly, Haigang Steel was not content merely trading iron ore. They wanted to extend their influence upstream to secure more bargaining power. Over the past couple of years, Haigang Steel had significantly increased its investment in domestic iron ore exploration projects, clearly indicating a strategic shift toward upstream industries. However, such industrial expansion was still exploratory, requiring gradual implementation.
After briefly discussing the iron ore futures contract previously signed with Hualing Steel, Li Tang left Wu Mining Group's headquarters and returned to Yunding Tower.
He immediately called Alice, asking her and Fred to come to Yanjing as soon as possible. Currently, several major domestic steel enterprises—including Haigang Steel, Fengli Group, and Qingsan Steel—had explicitly expressed interest in signing supply contracts. Formalizing these agreements would require Alice and Fred's direct involvement.
After hanging up, Alice walked toward Fred's office but found it empty.
Fred was currently at Eagle Magnesium Resources' Perth office, meeting with Charlie, the regional director. Years ago, it was Charlie who had approved a 1.4-billion Australian dollar investment in Fred's nickel and aluminum business—then later ousted him from the very nickel company he had founded. Charlie was indeed his old acquaintance.
"Lianying Mining holds proven iron ore reserves of 2.3 billion tons, with an additional estimated resource potential exceeding 5 billion tons!" Fred spoke passionately, face flushed, enthusiastically explaining the project to Charlie. "We plan to build a state-of-the-art port at Hedland capable of accommodating massive ships up to 400,000 tons, and construct a railway linking the port directly to our mines!"
He unfolded a meticulously crafted planning map, impressively detailed and grand.
Charlie listened attentively, frequently nodding but remaining silent.
Fred continued energetically, "We'll expand the mine in three phases, ultimately achieving an annual production capacity exceeding 150 million tons. At that point, Lianying Mining will surpass BHP Billiton and perhaps even Rio Tinto, becoming Australia's largest iron ore producer!"
"Hmm," Charlie finally responded softly.
"Based on current iron ore prices, with an annual production of 150 million tons, our yearly profits could exceed three billion Australian dollars!"
Fred eagerly presented the financing plan. "Our current investment requirement is 3 billion Australian dollars, of which we plan to raise one billion through equity financing, with the remaining two billion via bonds or loans."
"Three billion Australian dollars?" Charlie glanced upward. "That's very similar to your previous proposal of 3.5 billion dollars to develop your hometown nickel project."
Mention of the failed nickel project stung Fred deeply. It had been precisely that ambitious financing plan that caused Eagle Magnesium Resources' suspicions of misconduct, ultimately leading to his removal.
"They're two entirely different projects," Fred argued undauntedly. "You've seen iron ore price negotiations this year—prices surged from around thirty dollars per ton last year to sixty dollars now! Iron ore businesses will undoubtedly be highly profitable in the coming years!"
"Only because global supply-demand equilibrium has been disrupted," Charlie remarked calmly.
"Precisely! Currently, iron ore demand significantly exceeds supply."
"But the gap isn't huge," Charlie reasoned soberly. "If your mine achieves the proposed capacity of 150 million tons annually, as you described, supply would substantially increase, flooding the market and potentially creating a surplus."
Charlie had seen the iron ore boom of the '70s and '80s and the downturn throughout the '90s, remaining cautious. "Iron ore is a commodity; competition always leads to survival of the fittest. Do you believe your ore's quality and cost competitiveness can truly match BHP Billiton and Rio Tinto?"
"Absolutely!" Fred confidently asserted without hesitation. "We have numerous advantages over them! Our infrastructure—ports, railways, and mining facilities—will incorporate advanced digitalization and automation technologies, greatly enhancing operational efficiency. BHP Billiton's and Rio Tinto's facilities are decades old and increasingly outdated."
"How advanced is your automation exactly?" Charlie inquired.
"Our railway infrastructure will monitor every component digitally. Even the smallest bolt is electronically tracked, and any malfunction or wear triggers immediate replacement, preventing any transport disruptions. This ensures uninterrupted operation, day and night!"
Fred continued enthusiastically, "Our mine operations will employ fully automated mining trucks and equipment, drastically reducing labor costs. We're confident that within three years of starting operations, our production cost control will surpass both BHP Billiton and Rio Tinto!"
Fred's vision was truly inspiring, painting an impressive future.
However, Charlie remained unmoved, shaking his head resolutely. "I still don't think your Lianying Mining can survive competition against giants like BHP Billiton and Rio Tinto."
For decades, many mining companies had come and gone in the Pilbara region. How many survived, and how many remained buried beneath the red earth?
One general's triumph was inevitably built on countless bones.
Fred left Charlie feeling somewhat defeated, returning disheartened to Lianying Mining's modest headquarters. His office was cramped and cluttered, hardly befitting an entrepreneur of his stature. Yet, since joining Lianying Mining, Fred had never complained, dedicating himself fully to the company's growth and success.
"Lucati International Group's CEO from the U.S. has agreed to meet. We need to confirm the exact date and location," Olivia reported from beside him.
Since Fred brought his team into Lianying Mining, Olivia had become his most trusted aide, currently serving as CFO and wielding even greater authority than Emily. Olivia was central in managing major loans and financing arrangements.
Despite repeated setbacks in the capital market, including today's unsuccessful meeting at Eagle Magnesium Resources, investors still viewed Lianying Mining skeptically, doubting its ability to thrive amidst giants like Rio Tinto and BHP Billiton—unless market dynamics drastically changed.
A sudden knock interrupted their conversation. Alice stepped into the room, noticing their subdued expressions. "Talks with Eagle Magnesium Resources didn't go well?"
"It's not hopeless; both sides need more time," Fred maintained his optimism, offering a gentle smile. "Did something happen, Alice?"
"Li Tang called. He wants us in Yanjing immediately," Alice said simply.
"What's going on?" Fred asked.
"Li Tang mentioned he's finalized supply contracts with multiple Chinese steel companies..."
"Excellent!" Fred shouted excitedly, startling both women nearby.
"Did I say something extraordinary?" Alice wondered aloud, surprised by Fred's sudden exuberance.
"Previously, signing that ten-year contract supplying two million tons annually to Hualing Steel already raised significant attention and boosted our stock price considerably!" Fred explained enthusiastically.
"Well, iron ore price negotiations likely influenced our stock even more significantly," Olivia cautiously added.
"Either way, the effect was immediate!" Fred paced vigorously, filled with renewed enthusiasm. "BHP Billiton and Rio Tinto achieved their current scale because they seized Japan's rapid industrial growth in the '60s and '70s. For us, competing via markets like Japan, Korea, or Europe is futile. To challenge those giants, we must leverage the Chinese market and Chinese capital!"
"Well, our boss is Chinese—we've always had that advantage," Alice remarked casually.
"It's entirely different!" Fred insisted emphatically. "When we signed with Hualing Steel, I felt its special significance. After facing repeated rejections from Western investors, I've realized we must rely on Chinese steel companies to succeed!"
"Li Tang mentioned significant breakthroughs, with even larger Chinese enterprises involved," Alice reminded him.
"Our boss truly is an extraordinary entrepreneur," Fred sighed. "His thoughts always coincide with mine—but he consistently executes ahead of me."
Olivia was surprised to see Fred openly admire a Chinese businessman so sincerely—this was unprecedented.
"Li Tang has always been unique," Alice declared proudly. "In the mining industry, he's virtually a deity."
"Olivia, arrange our immediate departure to Yanjing. We must meet with Li Tang without delay," Fred instructed decisively.
"What about Lucati International Group?" Olivia queried cautiously.
"Meeting other investors right now seems premature," Fred concluded thoughtfully. "Our boss clearly sees further than we do."
…
Li Tang reviewed his list again. Currently, five steel companies had explicitly confirmed interest in signing futures supply contracts. However, additional contracts were still necessary.
Suddenly, his phone rang. Checking the caller ID, he recognized Li Zhaocai—the young heir-turned-businessman from Perth.
"Li Zhaocai?" he recalled thoughtfully. With slight hesitation, Li Tang finally answered politely.
"Li Tang? It's Li Zhaocai," the familiar voice spoke softly yet assertively. "Do you have time? Let's meet and talk."
"Certainly," Li Tang calmly agreed.
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