Fortescue misses deadline to secure $6 billion funding from China

Australia's third-largest iron ore exporter, Fortescue Metals Group today disclosed that it had missed today's deadline for securing  6 billion from Chinese banks to fund its ambitious expansion plans in lieu of selling iron ore at discounted rates to Chinese steel mills.

The Perth-based miner said in a statement to the exchange, "Fortescue Metals Group Ltd advises, with regard to its agreement announced on 17 August 2009 with the Baosteel Group and China Iron & Steel Association (CISA), that the condition subsequent relating to the completion of finance by 30 September, 2009 will not be met in time."

"Fortescue intends to continue working co-operatively with CISA including the provision of attractive iron ore pricing if requested," added the miner.

Last month, Fortescue Metals signed an iron ore supply agreement for 2009 with China Iron and Steel Association (CISA), and China's largest steel maker Baosteel Group, to supply iron ore at 2 per cent below the rate negotiated between Rio Tinto and Japanese steel makers. (See: China shuns Rio Tinto, signs long-term iron ore price with Australia's Fortescue)

As part of the agreement, the Chinese had guaranteed that Fortescue would be given priority during iron ore price negotiations for 2010 and would also receive help in securing $6 billion from Chinese banks to finance its expansion of its mine, port and rail project.

Fortesue had said at that time, that the iron supply agreement was subject to China securing $6 billion for its expansion plans in the Pilbara region of Western Australia.