Fortescue Metals Group Ltd. (FMG), the iron ore producer that raised $4.5 billion in new loans three months ago, started talks to sell a minority stake in its rail and port infrastructure as it offloads assets.
Australia’s third-biggest iron ore company got inquiries from strategic and financial parties interested in the assets, leading to talks with a “small group” of investors, the Perth- based company said today in a statement.
Fortescue Chief Executive Officer Neville Power said he was assessing bids for the assets in an interview with Bloomberg Television this month, days before agreeing to sell part of its stake in a mine venture for A$190 million ($200 million). A 49 percent stake in the assets may be worth A$4 billion to A$5 billion, according to Michael Evans, a resources analyst with CIMB Securities (Australia) Ltd.
Atlas Iron Ltd. (AGO), billionaire Gina Rinehart’s Hancock Prospecting Pty and offshore pension funds may be interested in buying a stake, Chris Drew, a Sydney-based analyst with RBC Capital Markets said today by telephone. Iron ore producer Atlas in May this year announced a study to build a railroad with haulage company Aurizon Holdings Ltd. (AZJ) as it expands production, while Hancock is currently seeking A$7 billion in funding to build the Roy Hill iron ore project, which is located close to the Fortescue railroad.
Fortescue rose 3.7 percent to A$4.47 in Sydney trading, the highest since Aug. 13.
“These investors recognize the world class infrastructure assets which Fortescue has developed,” Fortescue CEO Power said in the statement. “This provides an outstanding investment opportunity.”
Fortescue appointed Lazard Ltd. (LAZ:US) and Macquarie Capital Group Ltd. as financial advisers for the transaction.
The company in September slashed spending and cut jobs after iron ore prices plunged to a three-year low that month, before rebounding after China, the biggest buyer, announced stimulus spending on bridges, roads and subways. Fortescue may decide to restart an expansion to produce 155 million metric tons annually by the end of this month, Power said this month.
The average price of iron ore, Australia’s biggest export commodity, has declined 24 percent to $128 a metric ton so far this year compared with last year on slowing demand growth from China. Prices will average $122 a ton next year, according to the mean of nine analyst estimates compiled by Bloomberg.
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