HONG KONG: Trading in shares of mainland steelmaker Angang Steel Co Ltd was suspended yesterday after the stock rose for a second straight day on news that Asia's biggest iron ore deposits were found in Liaoning province, where the company is based.

Angang was halted in Hong Kong and Shenzhen under exchange requests and it will issue a statement later to clarify recent media reports, a company spokesman told Reuters.

Beijing is likely to let state-owned steel firms, including the parents of Angang and Bengang Steel, operate the newly found iron ore deposits, Guangzhou Daily reported yesterday.

The asset will be gradually sold to the listed companies, the newspaper quoted an analyst as saying.

Angang rose 3.22 percent in Hong Kong to HK$13.48 before the suspension in late morning. It rose 5.3 percent in Hong Kong and surged 7.4 percent in Shenzhen on Wednesday after news about the find came out. The estimated reserves of the iron ore deposits are at lest 3 billion tons.

Both Angang and Bengang Steel, which rose to its 10 percent limit on Wednesday, were suspended yesterday morning.

The discovery is positive as it should help to bring down mainland steel producers' production cost and enhance their bargaining power in iron ore contract price negotiations, CIMB said in a research report yesterday.

"Angang told us that it is keen to bid for ownership of the iron ore deposits," it said. But Morgan Stanley forecast Angang's share price will fall relative to the country index over the next 60 days.

"Yesterday's share performance, which appeared to benefit from a government announcement that a major iron-ore mine had been discovered in Liaoning province, appears vulnerable to a pull-back," it said in a research note yesterday.

Morgan Stanley said its check with industry contacts revealed that the mine is 1 kilometer underground and the average grade is less than 30 percent ferrous content, which would make it a very high-cost mine with little positive impact to the mainland's steel industry or Angang.

Agencies

(HK Edition 06/26/2009 page3)