Fortescue pursues iron ore joint ventures with Vale

Tuesday, 8 Mar 2016 06:59:51 | Michael Janda

FMG's Kings mine's production capacity is 155 million tonnes of iron ore a year. (ABC News: Sue Lannin)

Andrew Forrest's Fortescue Metals Group (FMG) has entered into non-binding agreements with Brazil's Vale to pursue iron ore joint ventures.

The non-binding memorandum of understanding (MoU) between the two companies proposes the formation of one or more joint ventures for the blending of iron ore from both companies for sale into China.

The aim of blending the iron ore is to produce a mix that is best suited to steelmaking customers.

Fortescue said the agreement also provides a framework for Vale to potentially buy Fortescue shares on market to acquire a minority stake, or to make an investment and gain partial ownership of some of Fortescue's current or future assets.

"The memorandum of understanding will allow us to work together to deliver long term value to our customers, through the efficient supply of an attractive and competitive new iron ore blend in China," said FMG's chief executive Nev Power.

FMG has stressed that the MoU is non-binding and subject to final agreement in various contracts, and will also require board and relevant regulatory approvals.

Brazil's Vale is the world's biggest iron ore producer and already operates a number of joint ventures, including the ill-fated Samarco operation with BHP Billiton that is facing billions of dollars in compensation payments after a dam collapse last year.

Fortescue shares yesterday surged almost 24 per cent to $3.08, on volumes about two-and-a-half times average levels, well ahead of strong 5 and 3.5 per cent gains for rivals BHP Billiton and Rio Tinto respectively.

Iron ore spot prices bounced around 20 per cent yesterday - the biggest one-day gain on record - hitting $US62.60 a tonne at the port of Tianjin China.

AustraliaPlus

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Fortescue pursues iron ore joint ventures with Vale

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