China Said to Plan $3 Billion Investment in Fortescue http://www.bloomberg.com/apps/news?pid=20601087&sid=alrRVjOYXUaU&refer=home
Feb. 24 (Bloomberg) -- China, the world’s largest metal consumer, may invest about $3 billion in Fortescue Metals Group Ltd., Australia’s third-biggest iron ore exporter, three people familiar with the transaction said. China Investment Corp., the $200 billion sovereign wealth fund, is in talks with Fortescue, which plans to use some of the proceeds to retire debt, the people said, asking not to be identified before an agreement. Separately, Chinese steelmaker Hunan Valin Iron & Steel Group agreed today to pay A$1.2 billion ($776 million) for a 16.5 percent stake in Fortescue. The Fortescue purchases would extend China’s investment in resource producers to $25 billion this month as the nation takes advantage of prices at a seven-year low to gain access to iron ore, copper and zinc. CIC is turning to mining companies after losing more than $5 billion on financial firms including Blackstone Group LP and Morgan Stanley. “China needs to boost its pricing power for iron ore and other raw materials because it’s a big consumer,” said Cherry Chen, a Beijing- based analyst with Core-Pacific Yamaichi International Ltd. “Investing in resource companies is a correct step for CIC to shun the financial crisis.” Fortescue is down 78 percent since touching a record A$13.15 a share last June, when record iron ore prices had helped turned Chief Executive Officer Andrew Forrest, 47, into Australia’s richest man. The stock fell 2.4 percent to A$2.83 on Feb. 20, giving it a market value of A$8 billion the last time it traded. Debt-Laden The Australian producer is facing a funding shortfall of A$731 million for an expansion, Macquarie Group Ltd. said today. Perth-based Fortescue has “non-current” borrowings of A$4.9 billion as of Dec. 31, 2008, according to company report. The Reuters/Jefferies CRB Index of 19 commodities fell to the lowest level since June 2002 on Feb. 17, as the global recession crimped demand from carmakers and builders. The price and demand collapse has forced indebted mining companies Rio Tinto Group and OZ Minerals Ltd. to seek investments worth $21.2 billion from Chinese state-owned companies earlier this month. The proposed CIC deal may be in preferred shares paying a dividend, and the payment rate hasn’t been agreed upon, one person said. CIC said Dec. 3 it would avoid investing in foreign financial firms after losing billions on stakes in Morgan Stanley and Blackstone. Calls to Wang Shuilin, in charge of CIC’s group public affairs, were unanswered in Beijing. Cameron Morse, a Fortescue spokesman, declined to comment. Australian Concerns The investments have spurred concern in Australia that China is getting strategic assets on the cheap. Treasurer Wayne Swan, which has the power to reject deals on national interest grounds, has tightened takeover laws and the Senate may hold an inquiry to scrutinize acquisitions by Chinese companies. Hunan Valin Iron & Steel today also said it agreed to buy 225 million new shares from Fortescue, and 275 million shares from two Harbinger Capital funds, giving the Hunan-province steelmaker a total stake of 16.5 percent. “Iron ore will be a hot spot this year in acquisitions and IPOs because China’s steel industry is expanding into raw material supply,” said Helen Wang, a Shanghai-based analyst with DBS Vickers. Deutsche Bank AG advised Valin. JPMorgan Chase & Co., Azure Capital Pty and Grant Samuel & Associates Pty were hired by Fortescue. China, the world’s largest steelmaker, accounts for more than half of traded iron ore, and consumes over a third of the world’s aluminum output and a quarter of its copper production. Last year, Australian mineral exports to China jumped 83 percent to A$22.53 billion. China’s economy could expand 6.7 percent this year even as the global recession curtails exports, according to the International Monetary Fund. The government is implement a $585 billion stimulus plan targeted mostly at infrastructure projects, spurring demand for raw materials. --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "World-thread" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/world-thread?hl=en -~----------~----~----~----~------~----~------~--~---
