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Trading halted in Fortescue Metals: more cash from China on the way?
08/13/2009 11:55 am EST
Speculation in Australia is that the news will be that China's sovereign wealth fund, China Investment Corp. (CIC), has decided to invest $1 billion into Fortescue. CIC, rumors go, will get convertible bonds in exchange for its cash.
The new money would go a long way toward funding Fortescue's goal of expanding producton to an annual 95 million metric tons by sometime in 2012. Production is now running at a rate of about 35 million tons a year.
Reaching production of near 100 million tons (which would put the company a solid third among the world's iron miners behind Vale (Vale) and BHP Billiton (BHP)) is essential for the company to reach a scale that it would let it bring down production costs to the levels now enjoyed by its bigger competitors.
Industry analsyts estimate that reaching a 95 million ton annual production rate would cost Fortescue$3 billion. Right now the company has about $650 million in cash.
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