Beaufield proves Chinese firms still interested in iron ore

The connection between slower growth in China and slumping commodity prices has been highlighted in the financial press over the last few months — but there are contrary signs to be found by astute investors.

Take Beaufield Resources (BFD-V), for instance. The junior explorer has an extensive land package in the famed iron ore-rich Labrador Trough — a region that, despite its undeniable mineral wealth, has fallen out of favour recently as investors absorb slow Chinese growth and lower commodity demand.

But Beaufield’s latest announcement flies in the face of such thinking, with the company announcing a non-brokered private placement with a Chinese firm at a premium to its market price.

Hongkong Huaxin Petroleum’s Beaufield investment will see the Chinese company buy 10 million shares of Beaufield for 20¢ per share, generating gross proceeds of $2 million.

Before the deal was announced on Oct. 4, Beaufield shares were trading at 13¢. The next day, the company’s shares closed at 16¢ in Toronto.

The shares being issued to Hongkong Huaxin are subject to a four-month “hold” period, and no commission charges were incurred by Beaufield.

The purchase will get Hongkong Huaxin a 9% stake in Beaufield, which will have 111.3 million shares outstanding.

Hongkong Huaxin is a subsidiary of China CEFC Energy Company, whose core businesses include bulk trading of oil, petrochemical products and oil storage. CEFC specializes in the oil, petrochemical and energy industries.

The move represents the Chinese company’s first investment in a Canadian resource company.

The deal brings Beaufield’s working capital up to $8 million, and allows it to step up its exploration program on iron claims that cover 430 sq. km within the Schefferville Iron district. Its property shares boundaries with Tata Steel, New Millennium Iron, Century Iron Mines (FER-T) and Labrador Iron Mines (LIM-T).

In mid-August Beaufield completed 22 holes at the property totalling 2,141 metres, with highlight intercepts of 60.5% iron over 7.6 metres and 48.4% iron over 19.8 metres.