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Fortescue Says No Equity Deal With China Firm

Australian iron ore prospector Fortescue Metals Group on Friday denied media speculation a Chinese company would take a stake in it, sending its shares down as much as 3.9 percent.

The Australian Financial Review business daily reported earlier in the day that a group such as China's Baosteel may be buying a stake in Fortescue, which is readying a new iron ore mine for start up in May.

The Australian outback's abundance of iron ore, nickel and other minerals is attracting a swelling number of overseas investors betting a raw materials boom, fueled by surging Chinese demand, will go on for years.

Fortescue shares were up 4.8 percent before the stock was placed on a trading halt pending an announcement, but retreated to a low of A$58.80 on resuming trade after the announcement.

The stock had risen as much as 26 percent on Thursday after Fortescue said it may have made another big iron ore discovery at its Solomon deposit.

Fortescue Chief Executive Andrew Forrest also said on Friday the company would pursue an application for access to two railway lines near the new find, operated separately by BHP Billiton and Rio Tinto.

The company has been fighting the two mining giants, currently in a takeover battle after BHP offered $140 million for Rio, in court for several years to open other rail lines they operate closer to Fortescue's additional deposits in the ore-rich Pilbara region.

Forrest said he expected the two companies to protest against the latest application. Rio and BHP were not immediately available for comment.

"There are a number of stranded iron ore deposits and while the newly identified Solomon deposits have their own infrastructure solutions, like other deposits, these may not be optimal," said Forrest, one of Australia's richest men.

Fortescue is trying to become the third iron ore miner in the ore-rich Pilbara behind Rio and BHP Billiton.

It has completed about 75 percent of the construction of an Indian Ocean port for the mining projects, while development work at its main project was 65 percent finished, its executive director, Graeme Rowley, told Reuters last month.

Fortescue has already pre-sold millions of tons of production to Baosteel, Tangshan Ironand Steel Group and other top steelmakers.

Forecasters say there is no end in sight for demand yet for Australia's rich minerals veins, which are seen adding A$116 billion to the nation's export revenues this year -- 8 percent over 2006.