fortescue metals group in foreign giants' sigh

Felicity Williams and George Lekakis
February 18, 2009 12:00am


EXCLUSIVE: MINING giant Anglo American and a major Chinese player are eyeing off fledgling iron ore producer Fortescue Metals Group.

BusinessDaily has been told the London-based Anglo American and China Investment Corp, a $US200 billion sovereign wealth fund, are in talks to take big stakes in Andrew "Twiggy" Forrest's mining company.

The prospective entry of Anglo American and China Investment Corp into the carve-up of Australia's premium resources assets is likely to create a big political headache for the Rudd Government.

The issue erupted last week after Rio Tinto said the Chinese Government owned Chinalco was to take a strategic stake in key assets of the miner.

Chinalco's planned $30 billion buy-in to Rio's iron ore, copper and aluminium operations has alarmed many of the miner's institutional shareholders in Australia and Europe.

China Investment Corp executives visited Fortescue's headquarters in Perth last week.

And Anglo American representatives inspected Fortescue's Cloud Break mine in Western Australia's Pilbara, also last week.

Fortescue spokesman Cameron Morse declined to comment on the separate tours by Anglo American and China Investment Corp.

"We regularly have visitors seeing our operations first hand for a range of reasons," he said.

"We don't provide comments on who those parties are.

"We receive numerous approaches from a range of companies and groups and inevitably that process is covered by confidentiality agreements."

Anglo American is also believed to be running the ruler over Rio's Pilbara iron ore operations.

Rio's proposed asset sale to Chinalco includes a 15 per cent stake in the miner's prized Hamersley iron ore mine in WA.

The move has sparked rumours that BHP Billiton, which abandoned its $US66 billion hostile bid for Rio last year, is planning a fresh a counter-attack on Rio in an attempt to head off Chinalco.

The combination of BHP and Rio's mines in the ore-rich Pilbara would unlock billions of dollars in cost savings.

Treasurer Wayne Swan said last week the government would be introducing new legislation to tighten some controls on foreign players buying local assets.

Rio Tinto and Fortescue are currently trading well below their 12-month peaks because of their heavily geared balance sheets and sliding commodity prices.

That means the foreign predators could pick up key assets at bargain-basement prices.