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Australia Watchdog Sues Fortescue over China Deals

Australia's markets watchdog is suing the country's third-largest iron ore miner, Fortescue Metals, and its chief, Andrew Forrest, accusing them of misleading investors over several Chinese deals struck in 2004.

The Australian Securities and Investments Commission (ASIC) said in announcing the extraordinary step that it was also asking the courts to consider striking off Forrest, the company's billionaire founder, as a company director.

Fortescue, whose shares fell as much as 8 percent on the news, said it would defend itself vigorously against the charges.

Only days earlier, the company won approval for a Chinese customer, state-owned Hunan Valin Iron and Steel Group, to take up a 17.55 percent direct stake in the company for $438 million.

The commission said its case against Fortescue involved announcements the firm made between August and November 2004 about framework agreements with three state-owned Chinese firms.

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"ASIC alleges that Fortescue engaged in misleading and deceptive conduct by overstating the substance and effect of agreements with the three Chinese companies, in announcements and media releases made to the market and investors," it said.

Fortescue announced in November 2004 that China Railway Engineering, China Metallurgical Engineering Construction Group and China Harbour Engineering had agreed to finance and build a A$1.85 billion (US$1.32 billion) mining-rail-port project for Fortescue in northwest Australia.

Between the relevant dates cited by the commission for its complaints against Fortescue -- August 23 and November 9, 2004 -- the company's share price jumped almost four-fold.