Posted on 09 Mar 2016
Australian miner Fortescue to team up with Brazil’s Vale
Australia’s Fortescue Metals on Tuesday opened the door to
joint ventures and other investment deals with the world’s biggest iron
ore producer Vale under an agreement aimed at serving Chinese
customers.
As iron ore prices jumped a record 19% overnight on the prospect of more
Chinese stimulus, Fortescue Metals Group said it had entered into a
non-binding memorandum of understanding with the Brazilian giant.
“(It) will allow us to work together to deliver long-term value to our
customers, through the efficient supply of an attractive and competitive
new iron ore blend in China,” Fortescue chief executive Nev Power said.
Fortescue, owned by billionaire Andrew “Twiggy” Forrest, said the
memorandum of understanding proposed the formation of one or more joint
ventures for the blending of selected volumes of iron ore from both
companies.
It also provided a framework for potential investment by Vale in
Fortescue “through a minority acquisition of shares on market and/or
investment in current or future mining assets”, a statement said.
In a conference call, Power told journalists that Vale - the world’s
third largest miner - could take up to 15% of Perth-based Fortescue,
Bloomberg News reported.
Iron ore producers had been battling a supply glut and softening Chinese
demand, which has seen the price of the key steel-making ingredient
plunge.
But commodity markets surged on Monday with iron ore spiking 19% to
US$63.73 - which IG Markets said was a record one-day jump - on China’s
weekend announcement to expand spending, with the prospect of increased
steel consumption boosting iron ore.
Shares in Fortescue, which exports 165 million tonnes of iron ore
annually from its deposits in Western Australia’s Pilbara region, soared
23.7% on Monday, but were down 7.47% after Tuesday’s announcement at
A$2.85.
Fortescue said the Vale agreement, which had been under discussion for
about a year, was subject to board and regulatory approvals.
