Fortescue, Vale forge £680m iron pact
As iron ore prices saw record gains early in the week, Australian miner Fortescue Metals Group formed a deal with the world's largest producer - Brazil-based Vale.
Fortescue Fpo
$17.21
08:31 20/09/24
The agreement gave Vale the option to buy as much as 15% of Fortescue, according to the latter's chief executive Neville Power.
Based on Tuesday's closing price in Sydney, that put the deal's value at around £680m. The agreement also paved the way for the two companies to form joint ventures and develop new mines.
Iron ore had its best day ever on Monday, after policymakers at China's National People's Congress indicated their willingness to support economic growth, rather than reform, at a time of uncertainty for the country's industries.
It was reported that a joint venture between Vale and Fortescue to blend iron ore at Chinese ports could begin in as little as six months, and deliver 80m to 100m tonnes of the resource to the steel-making industry.
Fortescue shares fell 9.4% in Sydney on Tuesday, closing at AUD 2.79, reflecting a correction in the market in which rival BHP Billiton also fell. Its shares had surged 49% so far this year, after announcing plans to cut costs and reduce its mounting debt.
"Vale was already offering probably what could be considered the cheapest iron ore shipment price, and it streamlines their offering into China," IG market strategist Evan Lucas told Bloomberg.
"It gives Vale entry into the Australian market that it didn’t have. Fortescue is the fourth-ranked iron ore supplier," he added.
Shares in Vale rose 9% in Brazil on Monday.