Fortescue, Rio Race for Pilbara Mines

123jump.com Staff
18 Jun, 2008
New York City

Fortescue and Rio Tinto race to develope Pilbara region rich in iron ore and unexplored. Fortescue Metals Group and Cazaly agreed on revenue split arragement if the Cazaly succeeds in gaining exploration and development rights. Rio Tinto approved expansion funding in the region to increase its annual capacity to 320 million tons by 2012.

[R]3:00AM New York, 7:00PM Sydney –Fortescue and Rio Tinto compete to develop Pilbara region mines as world demand for iron ore remains high.

Market Sentiments

ASX 200 index gained 0.4% or 20.5 to close at 5,443.20. The preliminary market turnover was 1.99 billion, worth $7.03 billion, with 557 stocks up, 683 stocks down and 377 unchanged. The most traded stock was Telstra with 63.2 million shares worth $287 million.

Market Driver

Fortescue Metals Group Ltd has entered into an agreement with Cazaly Resources Ltd to develop Rhodes Ridge Project in the Pilbara region of Western Australia.

Fortescues said in a statement, Cazaly had applied for exploration and prospecting licenses within the Rhodes Ridge Project boundaries and will provide marketing support if Cazaly succeed in gaining exploration and development rights.

Under the terms of the agreement, Fortescue would pay Cazaly an advance on future royalties calculated at $0.05 per ton of any inferred JORC compliant resource contained in the Rhodes Ridge Project with an agreed minimum payment of $20 million and an agreed maximum of $100 million.

In addition, upon the commencement of mining, Fortescue would pay Cazaly a royalty of $1 per ton for the first billion tons ore of shipped or $0.75 per ton for any further ore shipped capped at 1.65 billion tons providing the royalty does not exceed $50 million or 2% annual revenue.

The agreement however hinges on the issuance of a ministerial consent and grant of tenement rights to Cazaly and subsequent transfer of these rights to Fortescue.

The Rhodes Ridge Project is situated in the Pilbara region of Western Australia, approximately 40 km northwest of the Newman town on the south-eastern edge of the Hamersley Iron Province.

The Great Northern Highway passes through the Rhodes Ridge Project. The land the subject of the Rhodes Ridge Project is recognised as containing one of the largest undeveloped iron ore deposits in Western Australia.

Fortescue''s share rose 5% and Rio was up 2.3%.

Gainers and losers

Of the ASX 200 index stocks, Babcock & Brown led the gainers with a rise of 16% followed by increases in Babcock & Brown of 12.3%, in Flight Centre of 6.5%, in AED Oil Ltd of 6.5% and in Challenger Finance of 6.5%.

Of the ASX 200 index stocks, Allco Finance Group led the decliners with a fall of 19.4% followed by losses in Perilya Ltd of 8.5%, in Centennial Coal of 7.8%, in Timbercorp Ltd of 7.7% and in St Barbara Ltd of 6%.

Rio approves US$667 million for infrastructure and studies for mine expansions

Rio Tinto today announced that it has approved the funding of US$667 million (Rio Tinto share US$492 million) in infrastructure and studies for mine expansions as part of its drive to increase the annual capacity of its Pilbara operations to 320 million ton by 2012.

Of the package, US$518 million (Rio Tinto share US$343 million) will fund the early commencement of infrastructure works and acquisition of long-lead items such as heavy mobile equipment - key components of this expansion.

The balance of US$149 million is directed to a study of a new iron ore mine on the Western Turner Syncline, near Tom Price, following successful completion of the pre-feasibility assessment. The proposed mine would eventually ramp up to 29 Mtpa capacity, feeding into existing Tom Price processing plant, with production scheduled to commence in Q4 2010.

The expansion could help Rio Tinto''s Pilbara production to increase to 420 Mtpa and global production beyond 600 Mtpa in the future.

Rio Tinto Iron Ore chief executive Sam Walsh said early planning and acquisitions were vital to maintain an aggressive time-to-market schedule.

Flight Centre increases profit guidance

Australia''s largest travel agency, Flight Centre Ltd''s shares gained 6.5% after it increased its profit guidance for the current fiscal year ending in June.

In a statement to the stock exchange today, the agency said it expects its pre-tax profit for the year to June 30 2008 to exceed $210 million on a rise in global sales.

The new forecast, the agency said represents a minimum 38.5% increase on its record pre-tax profit for the previous corresponding period of $151.6 million excluding abnormal gains on its Brisbane head office property sale during 2006/07.

Chief financial officer Shannon O''Brien said further growth was expected during 2008/09 period. """"While our company continues to monitor market conditions globally, we are yet to encounter the challenges that retailers in some sectors have reportedly experienced,"""" he said.

He said in Australia demand continued to be healthy as various price points and strong employment trends and rising wages and value of the Australian dollar in the international market has only helped the sales momentum.

Mr O''Brien said ``With the opportunities we have for further improvement overseas, we would be disappointed if we did not achieve 10% to 15% pre-tax profit growth during fiscal 2009.''''

Sims share up on expected increase in earnings.

The world''s largest scrap metal recycler, Sims Group Ltd''s share advanced 5.6% rise after announcing that its full year earnings would exceed consensus earnings of analysts of $314 million by more than 10% to 15%. The share has appreciated 49% in the past year.

On May 8 2008, the company had in conjunction with the release of its nine month earnings, stated that its fourth quarter earnings would exceed those of the third quarter prior any expenses or other costs that may be recorded in connection with the Metal Management merger.

BHP to partner Antam in exploring nickel deposits in Indonesia

The world''s largest mining company, BHP Billiton is reported to have entered into an agreement with PT Aneka Tambang to study two-nickel deposits in eastern Indonesia.

BHP''s share was up 0.9%.