Hebei issue thwarts Fortescue share rally

Hebei issue thwarts Fortescue share rally

Fortescue's $1.85 billion Pilbara iron ore joint project with the three Chinese companies received a major setback when China Metallurgical Construction Corp. (CMCC) expressed doubts over the future of the project on March 24. Shares of Fortescue nosedived immediately after news of CMCC's reservations became public. Fortescue shares began making a comeback after the company circulated a notice that the contract with the Chinese companies was binding. Therefore, assured Fortescue, CMCC would not think of leaving the project. The rally was short lived though, as Fortescue's stock took another pounding yesterday after it surfaced that Chinese steelmaker Hebei Wenfeng Iron & Steel's $10 million prepayment for a 20-year iron ore deal would in the form of steel plate, not cash. Shares in the Australian mining company were down 15% at the close of trading yesterday. Fortescue had announced the $10 million prepayment of Hebei on October 6, 2004, but failed to mention that the payment might be made in means other than cash. The company yesterday told its shareholders that the company would receive 10'000 metric tons of steel plate from Hebei according to the “binding” contract. The company added that the value of the steel has risen above $10 million dollars.