Overseas interest in Western Australia’s iron ore players continues, with both Fortescue Metals Group Ltd and Mount Gibson Iron Ltd recently involved in negotiations with Chinese investors.
Overseas interest in Western Australia’s iron ore players continues, with both Fortescue Metals Group Ltd and Mount Gibson Iron Ltd recently involved in negotiations with Chinese investors.
FMG confirmed earlier this week that it was in equity placement discussions with Hong Kong-based commodities trader Noble Group Ltd.
In an announcement to the market, FMG said Noble, one of several potential partners the company was in negotiations with, had made an offer for an equity placement of 10 per cent of the fully diluted shares in Fortescue at a price valued between $360 million and $400 million.
A condition of the transaction was the establishment of a joint venture marketing company for the sale of FMG’s iron ore into China, to be owned 51 per cent by Noble and 49 per cent by FMG. No final agreement on the terms of the marketing joint venture had been reached, FMG said.
The company also advised that its project in the north-west of the state was on schedule and within budget.
“The $US200 million ($A267 million) facility established in March 2006 has enabled the company to commence the long lead time items required to maintain the project schedule,” FMG said.
“This facility is to be supplemented by a comprehensive financing package combining debt and strategic equity, which is planned to be in place within this current quarter.”
The prospect of FMG’s major equity deal with a Chinese investor comes days after another iron ore player, Mount Gibson Iron, announced it had received a notice to purchase its shareholding in subsidiary Asia Iron Holdings Ltd from a minority shareholder, Sinom Investments Ltd.
The notice to purchase terminates its agreement with China’s third largest steel producer, the Shougang Group, which was subject to minority shareholders in Asia Iron not exercising an option to match the Shougang offer within 28 days.
The binding agreement with Sinom for the sale of the interest is on the same terms as those previously agreed with Shougang Group. Under the agreement, the sale of the company’s 73 per cent stake in Asia Iron, which holds the Extension Hill Magnetite project in the Mid-West region of Western Australia, was for $52.5 million.
The company said it had entered into a further agreement with Shougang under which the parties agreed to re-instate their previous agreement if, for any reason, the Sinom agreement was terminated.
Mount Gibson sold its 54 per cent shareholding in Extension Hill Pty Ltd, which owns a 250 million tonne magnetite resource at Extension Hill, to Asia Iron in September 2004 and since then had increased its holding to 73 per cent.
Asia Iron is a Hong Kong registered holding company with subsidiaries in Australia and China.
Mount Gibson expects to start hematite mining at Extension Hill by late 2007 with the company expecting to produce between five and six million tonnes/year of hematite for the next five years, once the operation reaches full production.
The heightened interest in the state’s iron ore industry has also placed pressure on the development of common-user infrastructure in the north-west.
Recently, two members of the six-member Geraldton Iron Ore Alliance opted to ship ore from their projects to ports other than the proposed new port at Oakajee, 25 kilometres north of Geraldton.
Golden West Resources Ltd, while stating that it remains committed to the alliance, has signed an option agreement with the Esperance Port Authority to export iron ore for the first stage of its Wiluna project.
Meanwhile, Gindalbie Metals Ltd has stated its intention to use the expanded port facilities at Geraldton for both its stage one hematite project and stage two magnetite project joint venture with AnSteel.
In a statement, alliance chair Clive Brown said Gindalbie’s plans to utilise the expanded port facilities at Geraldton would not affect the broader alliance and its view to press for immediate decisions to be made on public policy issues relating to infrastructure development.
Fellow members Murchison Metals Ltd and Midwest Corporation Ltd confirmed last week they would work together on the feasibility study for the development of Oakajee port.
The news comes after fears of a division within the alliance were sparked following an announcement by Murchison that it intends to form a consortium to develop Oakajee, at an estimated $1.6 billion, without other alliance partners’ involvement.
