Shares in Australian iron ore giant Fortescue Metals Group Ltd jumped more than 10 percent yesterday on speculation that two of China’s largest companies are poised to pump money into the struggling miner.
Fortescue is one of the world’s four big iron ore exporters, along with Australia’s BHP Billiton Ltd and Rio Tinto PLC, and Brazil’s Vale SA, but has been battling slumping prices for the steel-making commodity.
The Australian Financial Review reported that China’s largest steelmaker, Baosteel Group Corp (寶鋼), and its biggest conglomerate, CITIC Group (中國中信集團), had held talks with Fortescue about an investment to help shore up its balance sheet.
China is Australia’s largest market for iron ore and the news sent Fortescue shares surging, closing 10.6 percent higher at A$2.40.
The Financial Review said there were no moves to take over Fortescue, but the two companies were interested in buying a stake, with the Foreign Investment Review Board (FIRB) reportedly approached seeking permission for an investment.
Fortescue released a statement saying it does not comment on speculation.
“Fortescue is not aware of FIRB applications by third parties and is in compliance with its continuous disclosure obligations,” the company said.
Fortescue chief executive Andrew Forrest has in recent weeks spearheaded a drive for the Australian government to hold an inquiry into the nation’s huge iron ore industry.
He alleges that BHP and Rio have been flooding the market, driving down prices to wipe out smaller competitors.
BHP and Rio both deny this and the government on Thursday last week ruled out a parliamentary probe.
The price of ore has tumbled 60 percent over the past year, hitting a decade low of US$47.08 per tonne early last month.
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