Fortescue dismisses Shanghai listing buzz

Australia's Fortescue Metals Group (FMG), the country's third largest iron ore producer, yesterday rejected the speculation regarding the company's listing in the Shanghai stock exchange.
 
Last month, Australian authorities approved a A$1.2 billion deal involving FMG and China's Hunan Valin Iron & Steel Group for raising the Chinese stake in the Australian company to 17.5 per cent to become its second largest shareholder. (See: Australia okays Valin stake in Fortescue Metals)

Andrew Forrest, chief executive of FMG was in China recently to attend a ceremony to celebrate the Hunan Valin investment in the Perth-based miner, where he had revealed to journalists that the company had been studying the possibility of its listing in Shanghai stock exchange for over a year.
 
The official China news agency reported Forrest's view that FMG's equity tie-up with Hunan Valin would help its localisation in China and may facilitate a Shanghai listing.

The reports said Chinese authorities planned to ease the stringent regulations to facilitate foreign firms listing in the country's stock exchanges under an ambitious development programme and converting Shanghai to a global financial hub by 2020.
 
FMG spokesman acknowledged the Chinese reports and told the company continually explores all options to enhance shareholder value, although no concrete decision has been made on the issue yet.

Further to the news, FMG share prices soared by 43 cents to A $3.07 on Monday, over 16.3 per cent higher than its previous closing, on large trading volumes. However, the prices retreated to A$2.88 yesterday, by 19 cents or 6.2 per cent.

Australian securities exchange (ASX) questioned the abnormal share price movement on Monday to which FMG responded that it was not aware of any information that had not been announced and might explain the trading in its securities.

Referring to the official ceremony in China, FMG said in a letter to the ASX: "At that ceremony, both companies reconfirmed their intent to work together."
 
It further stated:''With the strong relationship with Hunan Valin, Fortescue has been encouraged to review a listing on the Shanghai exchange. However, given existing restrictions on foreign company listings and other regulatory approval processes, such an action is not a current proposition."
 
Fortescue to look for Chinese funds
FMG will require up to $4 billion to boost its iron ore mining operations in Western Australia to meet the future demand of iron ore. Its Chinese partner Hunan Valin is in talk with China Investment Corp. to source the funds from China's sovereign wealth fund on a possible debt investment. Valin may also help in talking to other Chinese financial companies for the assistance.

Last week, another cash-strapped Australian iron ore miner Gindalbie Metals Ltd. got the government's approval for a deal with China's Anshan Iron & Steel Group emphasising the recent trend of increasing Chinese investments in Australia's minerals resources sector. (See: Ansteel gets nod to increase stake in Gindalbie)

Another major tie-up under review by the Australian government is the $19.5 billion Chinalco-Rio deal which has sparked widespread debates and criticism in the country, the latest being a joint advertising campaign by two prominent upper legislative house members calling for the government to block the deal signaling the growing dissatisfaction among politicians and campaigners.