FMG explores expansion funding options

Fortescue Metals Group Ltd is considering a number of finance options to fund expansion plans at its Chichester Range iron project, with a control estimate expected to be released within a few months.

The iron company today unveiled some detail on the status of its expansion plans after it achieved project completion status on its Cloudbreak mine in the Pilbara under the terms of a $2.7 billion bond financing arrangement.

The company has already placed orders for long lead items to expand its port facilities and train services and has awarded an $87 million contract for the extension of a proposed rail line from Cloudbreak to Christmas Creek to NRW Holdings Ltd.

NRW had previously completed a $140 million rail formation and associated works contract for FMG.

FMG aims to export 45 million tonnes of iron ore by the end of the 2009 financial year and aims to have the production rate at 55Mt during the March quarter of next year.

Chief executive Andrew Forrest has been reported as saying that expansion plans can support an operation in excess of 150 million tonnes per year.

Below is the full announcement:

Following the achievement of Project Completion, Fortescue Metals Group Ltd ("Fortescue") is pleased to provide some detail on the status of its expansion planning for its Chichester Range Project.

As advised to the market in the Media Release last weekend, the effect of reaching Project Completion status is that certain restrictions on the expansion of the Project, as imposed under bond finance documentation, are removed.

Fortescue is now able to implement its expansion plans in knowledge that the first stage of the Chichester Range program has been officially certified as complete.

With the proceeds of A$500 million equity which was raised last July, Fortescue set about working on an expansion plan which initially optimized production from the original Project plan of 45 million tonnes per annum
"Mtpa" to 55 Mtpa.

Since then Fortescue has focused on planning the next stage of expansion.

This proactive effort is of particular importance as it provides Fortescue with a significant competitive advantage in the contracting for expansion as other major projects are considered in Western Australia. These are the following
commitments which are underway:

Placing purchase orders for the Port's key long lead equipment including ship-loaders, reclaimers and stackers.

Placing long lead orders for train unloader equipment and essential construction services such as excavation, dewatering and concreting.

Awarding of the earthworks contract to NRW Construction for the proposed extension of the rail line from Cloudbreak to Christmas Creek;

Awarding the contract for the provision of rail sleepers and rail steel;

Awarding the contract to Jan de Nuls for the dredging of the berths and channels.

Awarding key detailed design contracts for the material handling facilities at the port and mine, the wharves and train unloader.

Mobilisation of a construction camp at Christmas Creek.

Fortescue expects to be able to announce further detail on the implementation of the expansion plans within the near future. The Board is currently considering a range of finance options that is expected to establish a strongly
funded expansion. A Control Estimate is expected within the next few months which will provide a detailed cost estimate of the expansion program together with an implementation schedule for the same.