16/12/2008 - 09:44

FMG mulls legal options over contracts

16/12/2008 - 09:44

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Fortescue Metals Group says it is reviewing the legal status of its shipping contracts as it reveals today that disputes have arisen from a decision to suspend two-thirds of its long-term ship charter contracts.

Fortescue Metals Group says it is reviewing the legal status of its shipping contracts as it reveals today that disputes have arisen from a decision to suspend two-thirds of its long-term ship charter contracts.

In a statement, the iron ore miner said it had sought legal advice prior to suspending the contracts, and will continue to do so in the "prudent management of the issue".

Earlier this month, Fortescue suspendeded all of its long-term cost and freight shipping contracts of (CFR) affreightment and consecutive voyage contracts.

The miner had said about two-thirds of its sales had been on CFR terms - whereby it covers transport costs and passes them on to customers at a premium - but this was likely to reduce to about one-third of sales.

It would instead increase freight on board (FOB) sales, which involve the customer directly paying a charter company for transporting product.

Fortescue had previously said the new arrangements were in direct response to market conditions demanding greater FOB sales and that it would not affect the volume of iron ore that it shipped.

It has been reported that at least one Asian shipping company have started legal action in the United States against Fortescue over the suspension of the contracts.

Today the miner said that each of the 10 contract affected will be considered on its own specific facts and merits as the company will use legal means to determine the disputes that have arisen between some parties and any future disputes.

Fortescue said it will continue to update the market should there be any material updates.

Shares in Fortescue slipped 19c to $2.44 at 11:45 AEDT.

 

 

The announcement is pasted below:

 

Fortescue Metals Group Ltd ("ASX:FMG" "Fortescue") advises that further to previous announcements regarding the suspension and/or delays of certain shipping contracts, it is continuing its review of the legal status of such contracts.

Fortescue sought legal advice prior to taking its decisive action under the contracts and will continue to do so in the prudent management of this issue.

Each of the ten (10) contracts that have been actioned, need to be considered on their specific facts and merits as Fortescue will use all the appropriate legal mechanisms for determining the disputes that have arisen between some of the parties and any future disputes that may arise. Fortescue will continue to update the market if there are any material developments.

 

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