Second China deal for FMG

Fortescue Metals Group has secured a second iron ore sales agreement with a Chinese buyer in a matter of weeks.

Last week the ambitious company, which hopes to construct a Pilbara iron ore mining operation, announced a 20-year binding sales contract with the Jiangsu Fengli Group.

That announcement comes a week after FMG entered into a 20-year sales deal with the Hebei Wenfeng steel mill. The Fengli deal also incorporates a $35 million capital injection through a mix of share subscription and prepayments of iron ore.

Fengli has bought 7 million FMG shares at $1 each – more than 40 cents more than the value of the FMG shares at the time of the agreement. FMG shares have since climbed to just over 80 cents.

As part of the agreement, Fengli has also committed to prepay $US20 million for iron ore. Half will be paid at the commencement of construction in early 2005 and the balance settled on the first shipment to Fengli from Anderson Point, Port Hedland.