Australian Iron Ore Exporter, Fortescue Metal Held Talks With China Investment
February 19th, 2009 | File Under : Iron Ore - Mining Investment
Fortescue Metals Group Ltd., Australia’s third-largest iron ore exporter, has held investment talks with China Investment Corp. and Anglo- American Plc. The stock rose 12 percent.
JPMorgan Chase & Co., the second-largest U.S. bank by assets, Azure Capital Pty and Grant Samuel & Associates Pty were hired to study approaches and proposals, Perth-based Fortescue said today in a statement. Talks are “preliminary and incomplete,” the company said.
China, the world’s biggest consumer of metals, has agreed this month to invest $21.2 billion in debt-laden mining companies Rio Tinto Group and OZ Minerals Ltd. to secure supplies. Fortescue, which sold shares in December to pay bills, wants to boost exports after last year delaying expansion amid frozen credit markets and a slump in demand.
“The Chinese are definitely looking for opportunities,” said John Veldhuizen, a mining analyst at BBY Ltd. in Sydney, who has a “hold” rating on the stock. Fortescue “will need capital down the road to develop and expand,” he said.
Fortescue, which has A$3 billion ($1.9 billion) of debt, rose 33 cents to A$2.99 at 4:10 p.m. Sydney time close on the Australian stock exchange. It has a market value of A$8.4 billion. The shares fell 74 percent last year after reaching a record of A$12.78 on June 24.
Chinese Acquisitions
China, the biggest buyer of raw materials, has already acquired $22 billion worth of commodity assets this year after metal and oil prices plunged 70 percent since July. OZ Minerals Ltd., the second-biggest zinc producer, agreed to be taken over by China Minmetals Corp. this week, and Aluminum Corp. of China has agreed to invest $19.5 billion in Rio.
“We do not comment on market speculation,” Anglo American’s London-based spokesman James Wyatt-Tilby said today in an e-mailed statement.
Executives from China Investment, the nation’s sovereign wealth fund, visited the Perth office of Fortescue last week and representatives of Anglo American also visited Fortescue’s iron ore mine in Western Australia’s Pilbara, the Herald Sun reported earlier today.
“Fortescue can confirm that there have been recent meetings and site visits with representatives of these companies to explore investment opportunities,” the company said in response to a price query from the exchange.
Anglo American, which controls the world’s biggest platinum producer, has said it’s looking to buy assets at the “bottom of the cycle.” China Investment, or CIC, may bring in Baosteel Group Corp. and China Shenhua Energy Co. as partners to invest in the iron ore producer, the South China Morning Post said Nov. 17, citing people it didn’t identify.
“If an opportunity comes across our table which really locks in long-term customer supply, which really locks us further and deeper into China, of course we will look at it seriously,” Fortescue Chief Executive Officer Andrew Forrest told reporters in Melbourne earlier this month.
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