FMG to Leverage Valin Investment to Tap China's Credit, Capital Markets By CSC staff, Shanghai Published: May 11,2009 Related articles
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Iron Ore Price Hikes Will Force China's �gGoing Out�h China Warns India: Spot Trading Iron Ore Has to Go China Gets First Approval for Australia Acquisition Canada Also Is the Frontier of China's �gForeign Exchange to Resources�h At least one Australian miner's relationship with a cash-rich Chinese partner is deepening. Fortescue Metals Group, Ltd., (FMG), the third largest iron ore miner in Australia, is looking to tap China's capital market and bank credits to implement its ambitious expansion plan at home.
According to China-cbn.com, Hunan Valin Iron & Steel Group (Valin), which has just become FMG's second largest shareholder, signed an overall cooperation agreement with FMG on May 8, and will provide equipment and financing to support FMG's further expansion.
On March 31, Valin's AUD 1.2718 billion investment in FMG was approved by the Australian government, the first big investment by a Chinese firm in Australia�fs mining industry to be approved under new rules, and on April 21, the deal was also okayed by China�fs National Development and Reform Commission. Valin Chairman Li Xiaowei said that after the deal was then granted approval by the Ministry of Commerce and the foreign exchange authority a few days later, all the procedures had been accomplished. Li Xiaowei is now one of FMG's directors.
FMG CEO Andrew Forrest revealed that FMG was planning an IPO on the Shanghai Stock Exchange, hoping to become the first overseas mining company to list on China's stock market.
The two firms are looking forward to working together on development and sales of iron ores, non-ferrous metals, project construction, and sourcing and shipment of equipment. Valin will also help FMG raise money in China for its future expansion. �@�@ FMG will cooperate with Valin in the joint exploration of its vast lands in Australia for iron ore and likely for non-ferrous metals, and will also work with research institutes such as China's South Central University in the development and processing of low-quality ores.
A Valin insider revealed that FMG and Valin were also seeking opportunities for cooperation in shipment. At present all Valin's iron ore ships are chartered by Valin itself. In future FMG will work with Valin in chartering ships, and the two may even found a joint venture shipping company.
FMG's annual iron ore production capacity stands at 55 million tons, but is expected to reach 95 million tons in the future. To expand production, FMG needs to construct matching facilities such as railways and ports. Li Xiaowei said Valin would help FMG get support from Chinese construction firms such as China Railway Construction Corporation and China Metallurgical Group Corporation, and introduce FMG to Chinese financial firms to help with funding. �gWe are now married, and we will help FMG quickly expand its annual production capacity to over 100 million tons, making FMG China's steel industry�fs largest iron ore provider. This is a win-win situation.�h
FMG needs about $3 billion-$4 billion to expand production to 95 million tons. Andrew Forrest says the Shanghai IPO will be FMG�fs next big project. The company is already listed in Australia.
�gWe've been doing surveys over the past 16 months, and will soon name a bank as our consultant, with whom we'll discuss how to get approved by Chinese supervisory departments. A prerequisite for public listing is that we must have a Chinese partner for overall strategy cooperation. We hope in future Chinese residents will be able to buy FMG shares on the open market, just as Australian investors can.�h
FMG Price at posting:
$2.90 Sentiment: Buy Disclosure: Held
(20min delay)