Iron ore developer Fortescue Metals Group last week signed a $535 million equity deal with a New York group after breaking off talks with Noble Group Ltd.
Iron ore developer Fortescue Metals Group last week signed a $535 million equity deal with a New York group after breaking off talks with Noble Group Ltd.
Leucadia National Corporation, which has a market capitalisation of $7.8 billion, has agreed to pay $402 million for a placement of 26.4 million Fortescue shares, or nearly 10 per cent of the company.
The holding company, which invests in diverse businesses across the US, will also invest a further $134 million under a loan note with a term of 13 years from signing.
The $US400 million deal is conditional on Fortescue raising the $2.5 billion of debt required to develop its iron ore mine in Western Australia’s Pilbara region by the end of the year.
“The introduction of the Leucadia investment will provide the requisite equity to enable completion of Fortescue’s project financing,” a Fortescue statement said.
The deal with Leucadia came a day after talks with Hong Kong commodities trader, Noble Group, fell through.
Fortescue had been discussing equity and marketing arrangements with Noble Group, which said it would not take a flagged $361.8 million equity stake in the company.
“While discussions with Noble were productive and conducted in a highly professional manner, an agreement could not be reached,” Fortescue said.
“Fortescue has chosen to pursue an alternative offer.”
Fortescue shares were placed in a trading halt on July 17 ahead of the investment news and last traded on that day at $9.41. After coming out of the trading halt, the company’s shares opened at $11.60 before closing that day at $9.85.
Discussions about marketing activities between Noble and Fortescue could still be continued in the future, Fortescue said.
Noble said it would be pleased if a marketing agreement could be reached.
A $US200 million facility set up in March has enabled Fortescue to start the long lead items required to keep the Pilbara iron ore project on schedule.
The company said a comprehensive financing package was expected to be in place within this quarter.
Fortescue is considering a 45 million tonnes a year operation, starting up in late 2007.
Leucadia is listed in the New York Stock Exchange and is a diverse holding company engaged in a variety of businesses, including manufacturing, healthcare services, telecommunications, real estate activities, winery operations and residual banking and lending activities.
Leucadia also owns equity interests in investment partner-ships and in operating businesses, including development of a copper mine in Spain, real estate activities and property and casualty reinsurance operations.
Fortescue last week also released its annual financial report revealing an operating loss after income tax of $2.1 million for 2006, up from 2005’s operating loss of $4.5 million.
The company recorded net assets for 2006 of $137.1 million, up 131 per cent on 2005 figures, with total assets increasing by $72.7 million to $221 million in 2006.
Fortescue said in its report that the increase in total assets comprised primarily of increases in exploration and evaluation expenditure, partially offset by lower cash balances of $18 million held at June 30 2006.
Its full-year accounts also included details of directors salaries, with chief executive Andrew Forrest paid $110,000, executive director of operations Graeme Rowley $380,000, and executive director commercial Russell Scrimshaw $250,000.
In regards to directors’ interests in FMG, Mr Forrest held 102.3 million ordinary shares at June 30 2006, accounting for 95 per cent of total directors’ interests in the company. At today’s closing share price of $9.84, his stake represents $1.01 billion.
No directors held options during the financial year.
