FMG settles another shipping dispute

11/09/2009 - 14:41

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Fortescue Metals Group has settled its third shipping dispute, today agreeing to pay an upfront $6.1 million to a Greek shipping company which had launched a $US130 million lawsuit against the iron ore miner last year.

FMG settles another shipping dispute

Fortescue Metals Group has settled its third shipping dispute, today agreeing to pay an upfront $6.1 million to a Greek shipping company which had launched a $US130 million lawsuit against the iron ore miner last year.

In a statement today, FMG said Splendour Special Maritime Enterprise, part of the Angelicoussis Shipping Group, has agreed to discontinue its legal proceedings.

Under the agreement, FMG will restructure its future cargo obligations with ASG into three, new five-year charters that will start as early as next month.

The freight rate under the restructure charter arrangements has been set at a base daily rate, slightly under the current market rate, with a hire incentive payment of an additional 50 per cent on top.

"The incentive payment includes a profit share arrangement where the amount paid is reduced if future market rates trade above the base rate during the term of the charters," FMG said in a statement.

"Under the share agreement if rates trade above the base rate up to the 'incentive' rate, then all profits are retained by Fortescue. When rates trade above the incentive level, the profits are split 50 / 50 between Fortescue and ASG."

FMG said it still has three outstanding disputes.

"Fortescue will continue to negotiate with these parties and expects to be able to reach satisfactory terms given its track record of mutually agreed settlement arrangements," it said.

Late last year, ASG filed a $US130 million lawsuit against FMG after the miner cancelled its shipping contracts after a drop in iron ore demand.

Earlier this year, FMG settled its dispute with Belgium shipping company Bocimar with the issue of $US22 million worth of shares and establishing a shipping joint venture, and made an $US23.35 million upfront payment to Classic Maritime and restructure the shipping arrangement.

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