Melbourne (Platts)--10Dec2012/450 am EST/950 GMT
Fortescue Metals Group Monday said it would sell half of its 50% stake in the Nullagine iron ore joint venture with BC Iron in Western Australia for A$190 million ($199 million), and use the funds to progress its Solomon project. The two Perth-based companies entered into the 50:50 Nullagine JV late in 2009, with BC Iron selling half of the project to FMG in return for access to its port and railway facilities. But FMG is focusing on lifting iron ore production capacity at its Pilbara mines to 115 million mt/year in 2013 from around 60 million mt/year currently, and has been looking to sell some non-core assets to help finance this expansion. FMG said funds from the 25% divestment could be used to restart work at the mothballed Kings iron ore deposit at Solomon, which will eventually contribute 40 million mt/year and take its total production capacity to 155 million mt/year in 2013-14. Article continues below...Request a free trial of: Platts SBB Steel Markets DailyPlatts SBB Steel Markets Daily provides transparent daily and weekly assessments of iron ore, coking coal, coke, ferrous scrap and ferroalloys prices, plus insightful analysis and commentary on the day's market activities.
Fortescue Metals Group Monday said it would sell half of its 50% stake in the Nullagine iron ore joint venture with BC Iron in Western Australia for A$190 million ($199 million), and use the funds to progress its Solomon project. The two Perth-based companies entered into the 50:50 Nullagine JV late in 2009, with BC Iron selling half of the project to FMG in return for access to its port and railway facilities. But FMG is focusing on lifting iron ore production capacity at its Pilbara mines to 115 million mt/year in 2013 from around 60 million mt/year currently, and has been looking to sell some non-core assets to help finance this expansion. FMG said funds from the 25% divestment could be used to restart work at the mothballed Kings iron ore deposit at Solomon, which will eventually contribute 40 million mt/year and take its total production capacity to 155 million mt/year in 2013-14.
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Platts SBB Steel Markets Daily provides transparent daily and weekly assessments of iron ore, coking coal, coke, ferrous scrap and ferroalloys prices, plus insightful analysis and commentary on the day's market activities.
The iron ore producer is due to make a decision on whether to restart work at Kings, which is two-thirds complete, by the end of December. Work at Kings stopped last October when iron ore prices slumped. FMG will lose access to only 2 million mt/year of iron ore from the 6 million mt/year Nullagine operation as a result of the sell-down. The two companies said they had agreed to lift available port and rail capacity for output from Nullagine to 6 million mt/year from 5 million mt/year currently. In addition to the A$190 million payment, FMG and BC Iron have entered into a "price participation" agreement, where they will split the difference when the average Platts price for 62% Fe fines is higher than $120/mt between April 2013 and September 2014. The 50% differential paid to FMG will then be multiplied by 158,300 mt/month, which is the estimated incremental tonnage that BC Iron will be able to sell due to its increased stake in Nullagine.--Paul Bartholomew, paul_bartholomew@platts.com --Edited by E Shailaja Nair, shailaja_nair@platts.com
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