China National Machinery and Equipment Import and Export Corporation (CMEC) said it has signed an agreement on mineral rights of Belinga iron ore reserves with Gabonese government.
A joint venture company will run the Belinga mine and its supporting infrastructures for 25 years, and is expected to have access to 30 million tons annually.
The exploration and construction costs will be more than $790 million, including the construction of 500 km railways, dams and deepwater ports, according to a report by Shanghai Securities News.
So far, the Belinga iron ore project is China's largest resource investment in Africa.
The mineral right agreement is part of a pact, which was reached in 2006 between CMEC and the Gabonese government to construct and run the Belinga iron ore reserves.
Under the agreement, Chinese enterprises headed by CMEC will further exploit the Belinga iron ore deposit and construct railways, ports and hydropower plants in cooperation with the Gabonese government.
The Export-Import Bank of China will finance the whole project.
Experts said once completed, the ratio of iron ore imports from Africa in China's total imports will be largely increased. It not only can diversify the country's iron ore import channels, but also crucial to its strategic reserves of iron ore.
With China's booming economy, its iron ore imports reached 380 million tons last year. In 2006 it reached 326 million tons and 275 million tons in 2005.
China's iron ore imports may exceed 625 million tons by 2012, accounting for about 67 percent of the world's cross-continent trade, said Zhu Kai, China president of VALE, a global mining company headquartered in Brazil.
"Chinese enterprises have to seek opportunities to exploit iron ore overseas, since it might be a way to obtain overseas resources and escape the impacts of the soaring prices," said Xu Yingchun, director of Lange Steel Information Research Center.
"Chinese enterprises can invest in foreign resources by setting up joint venture companies," said Jeremy South, steel specialist of Deloitte.
Belinga iron ore reserves was discovered in 1955 at Belinga, which lies in remote forest hills 500 km east of Libreville, the capital and port on Gabon's Atlantic coast. It has proven reserves of more than 500 million tons.