Anglo mum on talks with Fortescue

Johannesburg - Resources giant Anglo American on Wednesday declined to comment on whether it had held talks with the Fortescue Metals Group, an Australian mining company set to become a major exporter of iron ore.

This follows Fortescue's confirmation that it had held talks with Anglo American and China's sovereign wealth fund, China Investment Corporation (CIC) over investment opportunities.

While Fortescue admitted that the discussions were preliminary and incomplete, the mining and metals company has appointed financial advisory specialists JP Morgan Australia, Grant Samuel and Azure Capital to evaluate approaches and proposals and to act as strategic corporate advisors to the company.

"We do not comment on market speculation. Anglo American has teams all over the world for many different reasons, including sharing industry best practice, exploration studies and examining many aspects of existing operations," said Anglo American spokesperson Pranill Ramchander.

Fortescue is looking at ways to fund the planned expansion of its operations in the Pilbara region of Western Australia where it is ramping up its iron ore operations to an annualized rate of 55 million metric tons.

The company planned to grow production to 80 million tons and eventually 120 million tons but the drop in iron ore demand and the expected drop off in iron ore prices has meant it is unable to fund the expansion from its free cashflow as planned.

This has forced the miner to look for alternatives to fund its growth plans.

Dow Jones Newswires reported that there had long been rumours that Fortescue was seeking a cornerstone investor from China, with previous speculation centring on China's biggest steelmaker Baosteel.

"There were also rumours that cashed up global miner BHP Billiton, which exports iron ore from the same port as Fortescue, could turn its sights on the company after walking away from its bid for Rio Tinto," the newswire noted.

"One analyst said it would make sense for the Chinese Government to take a minority stake of about 15% in Fortescue and that this would probably win government approval. But it was harder to see what Anglo would get out of an investment in Fortescue as a diversified major that aims to own and operate significant assets," the report added.

- I-Net Bridge