FONT-SIZE Plus   Neg

Taiwan's Formosa To Invest $1.15 Billion In Fortescue's FMG Iron Bridge Project

Taiwan's Formosa Plastics Group has agreed Thursday to invest $1.15 billion in the FMG Iron Bridge project, a joint venture between Australian iron ore producer Fortescue Metals Group Ltd. (FSUMF,FMG.AX) and a subsidiary of China's Shanghai Baosteel Group Corp. The deal, subject to Australian Foreign Investment Review Board and Taiwan Investment Commission approval, is expected in September 2013.

"This transaction brings together Fortescue, Baosteel and Formosa Group, a company that looks set to become the new force in steel making in south-east Asia. We are truly excited to be partnering with Formosa in this important next chapter of our mutual development," Fortescue Chairman Andrew Forrest said in a statement.

The FMG Iron Bridge project joint venture is 88 percent owned by Fortescue and 12 percent owned by Boasteel. It was established about 14 months ago to develop the FMG Iron Bridge Project after
Fortescue spun out two of its Pilbara magnetite assets into a joint venture.

The joint venture owns the world class North Star and Glacier Valley iron ore deposits, located about 100 kilometers south of Port Hedland in Western Australia, carrying a combined iron ore resource of 5.2 billion tons.

The joint venture was expected to be floated on the Hong Kong Stock Exchange by September 2012, but it sulked in the second half of 2012 as iron ore prices dropped.

Fortescue noted that the current investment represents a pivotal step in the development of the highly competitive FMG Iron Bridge Project, and will also further strengthen its balance sheet.

As part of the investment, Formosa will acquire a 31 percent interest in the joint venture for $123 million, and also provide $527 million of capital expenditure, including $340 million to fund the construction of the first stage of FMG Iron Bridge.

Formosa will also fund 31 percent of a $1.05 billion investment needed for the second stage of the project, including the balance of the Formosa's initial funding.

The companies noted that the construction of the first stage is is expected to take 12 months, with first production of 1.5 mtpa of 66 percent Fe mHematite product commencing in early 2015. The construction of the second stage is expected to commence in 2015, with first production of 9.5 mtpa of 68 percent Fe magnetite concentrate expected.

As part of the deal, Formosa has also agreed to buy up to three mtpa of iron ore at market prices to supply to Formosa Ha Tinh Steel mill when commissioned.

Additionally, Formosa has elected to make an upfront prepayment of $500 million to the Pilbara Infrastructure Pty Ltd to access Fortescue's port facilities at Herb Elliott Port under separate infrastructure access arrangements.

Formosa is Taiwan's largest private company and is currently investing in the construction of a
22 million tons per annum (mtpa) integrated steel mill at Ha Tinh in Vietnam.

"We are very pleased to join hands with leading industry partners Fortescue and Baosteel, and look forward to a successful future for Iron Bridge and many years of productive cooperation between our companies. The successful development of the FMG Iron Bridge Project is of strategic importance to Formosa. We believe that this investment will secure a substantial long term resource to complement the Group's manufacturing activities," Formosa President Hung Chi Yang stated.

FSUMF closed Thursday's regular trading session at $3.76, down $0.04 or 1.10% on a volume of 2,900 shares.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

Business News

Editors Pick
Swiss drug giant Novartis AG reported Tuesday higher net profit in its third quarter, while sales were weak due to generic competition and pricing. Core earnings per share topped analysts' estimates, but sales missed their view. For fiscal 2016, the company continues to expect Core operating income to be broadly in line or decline low-single digit, and net sales to be broadly in line.. Social media site Twitter Inc., which is facing an uncertain future, is planning to cut around 8 percent of its total workforce, Bloomberg reported Monday citing people familiar with the matter. The company, which is trying cost control amid slowing sales growth, may announce the job cut of about 300 people as soon as this week. Visa Inc. (V) on Monday reported an increase in profit for the fourth quarter, as revenues jumped driven largely by increase in customer spending and inclusion of Europe business. Earnings and revenues trumped Wall Street expectations. Foster City, California-based Visa's fourth-quarter profit rose...
comments powered by Disqus
Follow RTT