Fortescue knew deal was off, documents show
28th April 2009, 17:00 WST
Fortescue Metals Group knew a deal with a Chinese company had collapsed a month before a newspaper article forced the miner’s admission, court documents show.
Documents released by the Federal Court in Perth show Fortescue received a fax from China Metallurgical Construction (Group) Corporation on February 3, 2005, advising that a deal with the iron ore miner was off.
But Fortescue did not announce to the stock exchange that its so-called “binding” deal with MCC had collapsed until a newspaper article on March 24, 2005, forced its hand.
In the documents released today, former Fortescue executive assistant Wei Fisher says in a witness statement company chief executive Andrew “Twiggy” Forrest was “very upset” when he received a fax from MCC saying the deal was off.
Her statement alleges she heard Mr Forrest say words to the effect: “This is ridiculous. If anyone tells the press, we’ve had it".
Her statement also says she was fired shortly after the fax arrived for not doing well in negotiations with the Chinese.
The deal in question was announced by Fortescue on November 5, 2004, as a binding contract under which MCC would provide financing, design and construction for Fortescue’s Pilbara mine and beneficiation plant.
The miner later admitted, on March 31, 2005, the deals were in fact only “framework agreements” - effectively agreements to talk further.
The talks between MCC and Fortescue hit a brick wall when the Chinese company demanded an 80 per cent stake in the miner but Fortescue chief executive Andrew “Twiggy” Forrest was only prepared to offer 30 per cent.
MCC also wanted more evidence that Fortescue had sufficient iron ore resources to underpin its ambitious mine and infrastructure plans, which further hampered negotiations.
The documents were released by the court today as the Australian Securities and Investments Commission’s civil case against Fortescue - alleging misleading and deceptive conduct - nears its conclusion.
ASIC claims Fortescue overstated the nature of agreements with MCC and two other Chinese state owned firms in stock exchange announcements in 2004, and failed to update the market when the agreements unravelled.
The regulator says the alleged conduct of the iron ore miner and its top executive “resulted in the markets being seriously misled as to the true status” of Fortescue’s multi-billion dollar mine and infrastructure project in WA’s Pilbara.
If they lose, Fortescue and Mr Forrest face maximum civil penalties of $6 million and $4.4 million, respectively.
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