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FMG speeds up negotiation on Sino-America financing agreement
Published: 28 Sep 2009 19:16:11 PST

Sep.29 MetalBiz--The iron ore contract signed by Australia FMG and China side may not able to performance according to the agreement, because it is unlikely to reach AU$6bln (U.S. $6.9bln) loan agreement with China's banks. The iron ore agreement price is lower than offer from Rio-BHP.

In order to expand the iron ore business in West-Australia, FMG formulated an ambitious financing plan with AU$5.5bln-6bln, while the complexity of the negotiation with many China' s banks may hamper it.

FMG announced to break the deadlock of iron ore negotiation in Mid-August and reached a common ground with China Iron&Steel Association (CISA) as well as Baosteel-China' s largest steel. It will cut the price by 35% based on the contract price of 2008.

Previously CISA refused to accept the reduction settled by Rio Tinto and Japan, S.Korea as well as Taiwan China, but the contract' s implement should based on FMG gaining China' s finance before Sep.30.

It is impossible for FMG to finish the negotiation in September, but it does not give up this plan. Russell Scrimshaw, executive director of FMG has gone to China in late last week to speed up the negotiation process.

However, even if not reach agreement before 30, FMG is expected not to give up the iron ore agreement. The most impossible result is to postpone the agreement during the period of financing negotiation.