Fortescue Metals Group Ltd. (Fortescue), Australia's third largest mining company after Rio Tinto and BHP Billiton, has confirmed that it is holding confidential discussions with a group of potential strategic equity investors.
The confirmation follows a newspaper report that China Investment Corp., a sovereign wealth fund holding around US$200 billion, and China's largest coal mining company China Shenhua Group are in negotiations for the acquisition of a 15.85 percent stake in Fortescue for about US$2 billion, in a move to establish an offensive to secure iron ore supplies.
However, Fortescue said that no conclusions regarding the negotiations have been arrived at yet.
Fortescue is currently constructing its own rail line in Western Australia linking up with the sea, thereby seeking to circumvent the rail duopoly in the region held by giant rivals Rio Tinto and BHP Billiton.
The move by the Chinese companies has just come after the recent $14.1 billion-acquisition by state-owned mining company Aluminum Corporation of China (Chinalco) in collaboration with US aluminum group Alcoa of a 12 percent stake in Rio Tinto, aimed at blocking a planned $119 billion takeover bid for Rio by rival miner BHP Billiton.