Formosa to invest US$1.15b in ore venture

Fortescue Metals Group, Australia's third-biggest iron-ore exporter, said Formosa Plastics agreed to invest US$1.15 billion in a planned project in Western Australia that includes Baosteel Group.

Formosa would acquire a 31 per cent interest in the FMG Iron Bridge joint venture for US$123 million and provide the first US$527 million of capital spending to develop the first stage of the project, 100 kilometres south of Port Hedland, Perth-based Fortescue said in a statement yesterday.

FMG Iron Bridge, jointly owned by Fortescue and a unit of China's Baosteel, owned the North Star and Glacier Valley iron-ore deposits, which have a combined iron-ore resource of 5.2 billion tonnes, Fortescue said. Taiwan's Formosa agreed to buy as much as three million tonnes a year of iron ore at market prices to supply a steel mill being built at Ha Tinh in Vietnam, the statement said.

"This investment will secure a substantial long-term resource to complement the group's manufacturing activities," said Yang Hung-chi, president of Formosa Resources.

First production of 1.5 million tonnes a year could begin in early 2015, Fortescue said. Formosa would prepay US$500 million upfront to Pilbara Infrastructure to access Fortescue's Herb Elliott Port under separate arrangements, Fortescue said.

The deal was subject to approval from the Australian Foreign Investment Review Board and the Taiwan Investment Commission, which was expected to be completed next month, Fortescue said.