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http://www.theaustralian.news.com.au/business/story/0,28124,26132155-5005200,00.html



Forrest racing against $7bn funding deadline

Matt Chambers | September 28, 2009

Article from: The Australian
ANDREW Forrest's Fortescue Metals Group appears unlikely to meet an end of September deadline to secure $US6 billion ($6.9bn) of cheap funding from Chinese banks, putting in jeopardy iron ore contracts signed by the miner at a discount to prices offered by Rio Tinto and BHP Billiton.

The complexities of negotiating a deal with multiple Chinese lenders, including policy bank Export-Import Bank of China, are understood to be standing in the way of Fortescue's aggressive timetable for securing between $US5.5bn and $US6bn to help it expand its West Australian iron ore operations.

In mid-August, Fortescue claimed it had broken an iron ore pricing impasse, agreeing to sell the China Iron & Steel Association and China's biggest steel maker, Baosteel, all its production in the second half at a 35 per cent discount to last year's prices.

The deal gave the CISA a face-saving solution to its refusal to accept the 33 per cent discount Rio had agreed with Japanese, Korean and Taiwanese mills. But it was conditional on Fortescue securing financing by September 30.

While the chances of a deal this month are slim, Fortescue has not given up, with executive director Russell Scrimshaw flying to China late last week to try to make progress in the talks.

If a deal is not reached by Wednesday, Fortescue, which depends on the finance for growth, is not expected to walk away from the iron ore pricing deal. A more likely outcome would be an extension of the deal while financing negotiations continue.

Separately, Fortescue and Cazaly Resources appear to have had their attempts to wrest the Rhodes Ridge iron ore tenements in WA's Pilbara region away from Rio dashed by the state Mining Warden's Court.

Cazaly argued that Rio and joint venture partners Wright Prospecting and Gina Rinehart's Hancock Prospecting should be forced to give up Rhodes Ridge, which has been held for decades without being developed.

Late on Friday, warden Graeme Calder ruled that the Rhodes Ridge partners held rights of occupancy to Rhodes Ridge but that this did not preclude exploration licences there being granted to Cazaly.

Cazaly, which went into a trading halt on Friday afternoon, declined to comment yesterday due to the complexity of the decision, which is being studied by its lawyers. A decision on the licences was adjourned to October 15.

In another stoush with the big miners, Mr Forrest's attempt to access BHP's and Rio's private Pilbara iron ore rail lines moves to the Australian Competition Tribunal today, with joint hearings scheduled on two conflicting decisions by successive treasurers.

The tribunal will hear applications from BHP and Rio protesting against Wayne Swan's decision last year to declare BHP's Goldsworthy rail line open to third party access, and from Fortescue opposing former treasurer Peter Costello's 2006 decision not to declare BHP's Mt Newman line open.


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