deadline missed in fmg funding deal

http://www.miningnews.net/StoryView.asp?StoryID=1034817
Claire Svircas
Wednesday, 30 September 2009

FORTESCUE Metals Group's plan to secure $US6 billion ($A6.8 billion) in Chinese financing has missed the September 30 deadline, but the iron ore miner says it will remain in discussions until an agreement is reached.



A ship carrying Fortescue Metals Group's iron ore to China.

The company said in a brief statement today it would continue to work with Chinese steel maker Baosteel and the China Iron and Steel Association on the funding plan and the provision of attractive iron ore pricing.

Analysts had tipped the Pilbara miner to announce an extension to negotiations, citing the short six-week timeframe as making an agreement highly unlikely.

The deal, announced in August, saw FMG agree to sell Chinese steel mills 20 million wet tonnes of iron ore at a 3% discount to its competitors, provided the three partners arranged $US5.5-6 billion in financing by September 30 to fund an expansion program in the Pilbara iron belt.

The agreed price was US94c per dry metric tonne unit for FMG’s rocket fines, equating to about $55.50 per dry tonne for FMG’s grade iron ore.

FMG has also agreed to a price of $1/dmtu for high-grade lump, which is equivalent to about $61 per dry tonne on a free-on-board basis.

The prices are a 35% discount to last year's prices.

The deal is a small discount for FMG but represents an easing from CISA, which was calling for price cuts of as much as 45%.

At the time of the deal, FMG chief Andrew Forrest said he believed the move would help ease the deadlock between the two camps.

Fortescue shares dropped slightly as the deadline approached, closing down 0.26% at $A3.90 yesterday and a further 3.1% or 12c to $3.78 in morning trade today.