fmg interesting

Buyer snaps up 5pc of Fortescue
Kevin Andrusiak
30 November 2006

THE Beijing-backed investment house Citic is believed to have waded into the share register of aspiring iron ore miner Fortescue Metals, underlining the commodity-hungry nation's growing interest in Australian resource companies.


Sources said yesterday that Citic was the investor behind a $147.8 million purchase of 13.2 million Fortescue shares representing 5 per cent of the company.

The purchase, through Patersons, was at $11.22 a unit -- a big premium to recent exchanges -- and took place about 20 minutes after trading began. Fortescue shares added 91c yesterday to $10.50 and again made its founder Andrew "Twiggy" Forrest a paper billionaire.

It is still unclear who the seller was, but it can only be one of three parties.

Mr Forrest owns close to 39 per cent of available Fortescue capital, while US-based HMC Investors holds 18.3 per cent.

Cornerstone investor Leucadia claims 10 per cent after it signed a $400 million equity and loan deal crucial to the funding for the project.

Mr Forrest and Leucadia are unlikely to sell down their stake in the company.

Neither of the US firms could be contacted for comment while Blake Dawson Waldron, the legal firm that acts for HMC, did not return phone calls.

Fortescue chief operating officer Graeme Rowley said Fortescue had not been talking to anyone about becoming a substantial shareholder: "I have no knowledge of who has been doing the selling, or who has been doing the buying."

Citic is a state-owned industrial holding company with an annual turnover of $US3.4 billion ($4.3 billion). It is an acquisition vehicle for the Chinese Government and is based in Hong Kong.

Citic already has interests in the Australian iron ore market and a $5.15 billion deal to develop Clive Palmer's tenements in the West Australian Pilbara, which holds between 60 billion and 100 billion tonnes of magnetite ore.

Market rumours last year indicated Fortescue had been talking to Citic and Russian investors over its $3.7 billion Chichester Ranges project in the Pilbara, the biggest greenfield development in Australia aimed squarely at smashing the iron ore duopoly of BHP Billiton and Rio Tinto.

It is eyeing a first-shipment date of early 2008 and this week received vital rail development approvals.

If true, the Citic approach comes hot on the heels of other Chinese investments in Australian iron ore that have been planned for shoring up supply.

The Chinese had tried to secure leverage in the massive $3.3 billion project by funding infrastructure development at the site.

That ultimately led to the Australian Securities and Investments Commission moving against Mr Forrest, for allegedly misleading the share market.

Hong Kong investment fund Shanghai Merchants this month entered both sides of the share registry in the bitter Mount Gibson takeover of mid-tier rival Aztec Resources.

Russian steel czar Alisher Usmanov also has a toe-hold in the industry after buying up Mount Gibson shares