Fortescue Metals Group Ltd. (FMG), Australia’s third-biggest iron ore exporter, said Formosa Plastics Group agreed to invest $1.15 billion in a planned project in Western Australia that includes Baosteel Group Corp.
Formosa will acquire a 31 percent interest in the FMG Iron Bridge joint venture for $123 million and will provide the first $527 million of capital spending to develop the first stage of the project, 100 kilometers south of Port Hedland, Perth-based Fortescue said today in a statement.
FMG Iron Bridge Ltd., jointly owned by Fortescue and a unit of China’s Baosteel, owns the North Star and Glacier Valley iron ore deposits, which have a combined iron ore resource of 5.2 billion metric tons, Fortescue said. Taiwan’s Formosa agreed to purchase as much as 3 million tons a year of iron ore at market prices to supply a steel mill under construction at Ha Tinh, in Vietnam, the statement said.
“The successful development of the FMG Iron Bridge project is of strategic importance to Formosa,” Hung-Chi Yang, President of Formosa Resources Corp., said in the statement. “This investment will secure a substantial long term resource to complement the group’s manufacturing activities.”
First production of 1.5 million tons a year could begin in early 2015, Fortescue said. Formosa will prepay $500 million upfront to Pilbara Infrastructure Ltd. to access Fortescue’s Herb Elliott Port under separate infrastructure access arrangements, Fortescue said.
The deal is subject to approvals from the Australian Foreign Investment Review Board and the Taiwan Investment Commission, which are expected to be completed next month, Fortescue said in the statement.
Stage two of the project is dependent on government and venture approval and will be funded by the three companies, according to the statement.
Deutsche Bank AG advised Fortescue and Formosa by Australia & New Zealand Banking Group Ltd. (ANZ)
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