Fortescue misses funding deadline

Fortescue Metals failed to meet yesterday's deadline for a US$6 billion funding deal with Chinese banks.

Fortescue Metals failed to meet yesterday’s deadline for a US$6 billion funding deal with Chinese banks.

“Fortescue Metals Group advises, with regard to its agreement announced on 17 August 2009 with the Baosteel Group and China Iron & Steel Association (CISA), that the condition subsequent relating to the completion of finance by 30 September, 2009 will not be met in time,” the company announced in a statement to the Australian Securities Exchange.

The funding was part of a deal Fortescue reached with Baosteel and CISA to supply the Chinese steel industry with 18 million tonnes of iron ore by 31 December.

Fortescue’s deal represented a 3% discount to the benchmark price Rio Tinto set with non-Chinese steel makers in May.

The iron ore pricing agreement may now be under a cloud as it was subject to Fortescue completing the financing deals with Chinese banks.

“Fortescue intends to continue working co-operatively with CISA including the provision of attractive iron ore pricing if requested,” the company said.

The Fortescue pricing deal was at the time seen as a victory for Chinese iron ore price negotiators, who have steadfastly refused to accept a proposed 33% price cut that Rio Tinto had offered Japanese and Korean customers.

CISA has been holding out for a price cut of around 40%.

Reports from China earlier this week have said that CISA is now in iron ore negotiations with both BHP Billiton and Brazil’s Vale, after talks with Rio Tinto were suspended.

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