Logistics, Ports & Terminals, Mining and Heavy Industries

FMG share bump raises asset sale chatter

Ship loading iron ore at Port Hedland. Photo: Fortescue Metals Group

A lift in Fortescue Metals Group’s share price despite a two-month low in the iron ore price has raised speculation over the Pilbara miner’s potential sale of mine, rail and port assets to overseas buyers.

After opening on Monday morning at $1.85, FMG’s share price was $2.03 as at 11:40am on Wednesday, October 7, representing a 9.7% increase in a little over two days for Australia’s third force in iron ore.

That price is still, of course, historically low for Fortescue.

The miner peaked at $12.13 a share in 2008, during the peak of the iron ore cycle, before dipping below $1.80 during the global financial crisis. Between late 2010 and early 2014 Fortescue’s share price wavered around the $5 mark.

But during the latest iron ore slump, Fortescue’s price has dipped below $2 again, sitting below that mark for much of 2015.

So a near-10% rise in the price, despite a two-month low in the iron ore price to start the week, has certainly raised some eyebrows.

It has led to speculation the miner is progressing in talks with potential buyers for part of its mines, railway and port infrastructure in Western Australia’s Pilbara region.

According to AFR’s Street Talk column, talks are firming up with Hebei Iron & Steel, one of the several Chinese groups reportedly interested in the discussion.

A deal has the potential to raise $4 billion, which would go a long way toward securing FMG’s position as a long-term iron ore producer in a tough future market.

Fortescue has said in the past it is open to the discussion, and according to Fairfax a source close to the miner said the deal was not imminent, but said negotiations remain live.

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