new partner

New FMG partner as Noble talks fail
Robin Bromby, Projects
July 18, 2006
ANDREW Forrest's Fortescue Metals Group is believed to be close to announcing a new partnership deal for its massive iron ore project after talks with Hong Kong-based Noble Group broke down.

FMG called a trading halt yesterday ahead of a statement by Noble to the Singapore Stock Exchange saying it had halted talks with the Perth-based company, which wants to become the "third force" in the Pilbara iron ore industry alongside BHP Billiton and Rio Tinto.

A source close to the company said the sticking point may have been a demand by Noble, which sells commodities worth $16 billion a year, for a 51 per cent stake in FMG's marketing arm.

Mr Forrest was unlikely to surrender control of any significant part of the project, which FMG hoped would be shipping iron ore by 2008. There were many alternatives to Noble, Mr Forrest said.

Noble had been planning to take a 10 per cent stake in FMG for between $US270 million and $US300 million ($358.67-398.52 million).

FMG was forced to reveal the Noble talks last week, due to market rumours a deal was close.

It had been reported that FMG had been deliberately holding off signing up the last 9 million tonnes of its planned iron ore production as a lure to a prospective equity investor.

Until recently, Noble was seen as the frontrunner to partner with Mr Forrest. There had been reports the Chinese government-controlled giant Citic Group and a Russian company had also been talking to FMG.

Noble chief executive Richard Elman said yesterday the parties had failed to reach agreement on "certain elements of various contracts".

But he left the door open to some future marketing arrangement with FMG for sales of iron ore to China.

FMG's partnership prospects have been in flux for more than a year. Just before Easter last year, there was a very public rupture with Chinese groups after Mr Forrest announced binding contracts for the sale of iron ore, when only an agreement to commit to negotiate such contracts had actually been signed.