INTERVIEW-Australia's Atlas lands on China's iron ore map

* Sees output up 12-fold in 2012 from 1 mln tonnes in 2009

* China steelmakers support ironore projects, undermine big 3

By Bruce Hextall

SYDNEY, Jan 15 (Reuters) - Australia's newest iron ore miner, Atlas Iron (AGO.AX), is expanding production, urged on by Chinese buyers keen to weaken the bargaining power of the big producers such as Rio Tinto (RIO.AX) ahead of annual price talks.

Atlas Iron said on Thursday its expansion plans remained supported by demand from China, although steel mills are pushing for a 40 percent cut in contract prices from Rio Tinto, Brazil's Vale (VALE5.SA) and BHP Billiton (BHP.AX)(BLT.L) for 2009.

For a graphic showing iron ore price moves, please click: here

"There's something of a chasm out there -- there's a huge disconnect between the financial pages and ... and what my marketing team is hearing. We've got 10 keen expressions of interest yesterday from people wanting to buy iron ore," Atlas Chief Executive David Flanagan said.

Atlas's expansion plans fly in the face of cuts in iron ore output revealed by Rio Tinto in its fourth-quarter production report on Thursday in response to Asian steel mills deferring shipments as a slowing global economy cuts demand. [ID:nSYD376178]

Flanagan said the company was still targeting exports of six million tonnes per annum in 2010 and growing to 12 million tonnes per annum by 2012 as it brought new deposits into production at its Pilbara operations in north western Australia.

"We just can't get all these projects up quick enough - if we could get more port capacity we would be shipping more ore today," he said.

Atlas ships its ore through the port built by Fortescue Metals Ltd (FMG.AX) which has become the first iron ore miner in the Pilbara to allow third parties to use its infrastructure.

Under its current contract with Fortescue, Atlas is limited to shipping 1 million tonnes a year.

THICK AND FAST

Project funding was not a problem, according to Flanagan who said China's steel groups stood ready to become project partners and sign long-term off-take agreements, giving junior miners the capacity to develop new projects at a time when traditional project financing was harder obtain because of the credit crisis.

"The money is coming at us thick and fast, it may be from strategic investors and financial investors but the money is still there," said Flanagan.

He said the company's funding requirements were quite modest.