On Tuesday, February 24, Australia's Perth-based miner Fortescue Metals Group (Fortescue) said that Chinese steelmaker Hunan Valin Iron and Steel will purchase a 16.5 percent stake in the Australian iron ore miner for AU$558 million (approx US$360 million).
Accordingly, Hunan Valin will buy 225 million newly issued shares and become Fortescue's second biggest shareholder after chief executive Andrew Forrest, and will be offered a board seat at Australia's third biggest iron ore exporter. However, while the Chinese steelmaker says it will take a holding of as much as 16.5 percent in the iron ore miner, a standstill agreement prevents Hunan Valin from having an interest of more than 17.5 percent in Fortescue.
Fortescue said in a statement, "If the share subscription agreement gains the required regulatory approvals, Hunan Valin's equity in Fortescue will increase to more than 16 percent of the expanded issue capital."
Mr. Forrest, who owns 35 percent of Fortescue, said in August that the company would remain Australian controlled.
The Hunan Valin deal needs the approval of regulators in Australia.
Separately, Hunan Valin said that it will buy 275 million Fortescue shares from US-based fund Harbinger Capital Partners. The Chinese company, which was advised by Deutsche Bank AG (DB) on the deal, said that the combined cost of the two deals is AU$1.2 billion (US$774 million), to be funded out of cash reserves and finance facilities.
Meanwhile, Fortescue has announced that it has started mining at its Christmas Creek iron ore deposit, in the Pilbara region of Western Australia.
"The start of mining at Christmas Creek will be of great benefit to Fortescue's overall operation, as it provides enhanced flexibility to the mine plan, as well as giving the marketing team more product blending options," said Fortescue head of operations Paul Hallam.
Ore from the new operations would be blended with product from the established Cloudbreak mine.
Fortescue stated that, in total, the Christmas Creek area represented a significantly larger deposit than Cloudbreak, holding a current reserve estimate of about 997 milllion mt, compared with Cloudbreak at 628 million mt.