Fortescue Metals closed a $1.15 billion deal on Friday with Taiwanese steel firm Formosa Plastics which will see its FMG Iron Bridge project get off the ground.
Formosa will join a partnership agreement, created 14 months ago when Fortescue struck a deal with Chinese steel major Baosteel.
FMG Iron Bridge was scheduled to float on the Hong Kong Stock Exchange last year, but was put on the back burner when iron ore prices plummeted in late 2012, SMH reports.
Under the new deal, Formosa will dish out $123 million to secure 31 per cent of a new partnership with FMG Iron Bridge, and will fund the first $US527 million ($576 million) to construct the stage one of the Pilbara project.
The project, located about 100 kilometres south of Port Hedland in WA includes the North Star and Glacier Valley iron ore deposits, estimated to have a combined iron ore resource of 5.2 billion tonnes.
Formosa has also agreed to purchase 3 million tonnes of iron ore a year from Fortescue at market prices and if stage two of the FMG Iron Bridge project is approved it will participate.
The company has also agreed to make an upfront payment of $500 million to Fortescue to secure access to its port and rail assets in the Pilbara. The prepayment demonstrates customers are will to pay substantial sums to access the company’s infrastructure.
Fortescue has been considering selling off its stake in its Pilbara port and rail assets, but is also battling smaller miners who are attempting to gain access to its railway under third-party access laws.
The asset sales were earmarked amidst a high Australian dollar and low iron ore prices, a situation which sparked debt issues for the company.
But the company’s financial position has since been assisted by the Aussie dollar dropping below parity with the US and the stabilisation of iron ore prices.
Fortescue chief executive Nev Power said the deal will strengthen the company’s balance sheet and when asked it The Pilbara Infrastructure (TPI) sale would go ahead he remained non-committal, SBS reports.
"TPI transactions will only proceed on the basis that we get full market value for those assets and get it on terms that allow us to continue to operate our network efficiently," he said.
He added that the sale of “non core assets” is helping the company meet its debt obligations with increasing speed.
Power explained that granting Formosa access to the infrastructure is completely separate to the third-party access processes, but the move does send an important message.
''What I think it does do very clearly is demonstrate the tremendous value that is in the infrastructure we built, it's world-class infrastructure, it's highly efficient and highly productive,'' he said.
Power added that additional joint venture partners could be brought into the project, flagging Fortescue is aiming to lower its 61 per cent stake in the assets.
''We want to maintain a minority interest in the project, but with an interest now effectively at 61 per cent we do have some further opportunity, and of course we are 88 per cent within FMG Iron Bridge so there is certainly an opportunity for further investment by others in the project,'' he said.
Stage one of the project is expected to take 12 months of construct, with first production expected in early 2015.
The first stage will see 1.5 million tonnes of hematite exported, with the second stage ramping up to see 9.5 million tonnes of magnetite concentrate piped to Port Hedland for export.
The deal is subject to approval from both Australian and Taiwanese regulators.