Fortescue Plunges 21%; Arrow Acquires Pure

123jump.com Staff
22 Dec, 2008
New York City

Australian stocks fell after Fortescue Metals Ltd. said it issued 1.55 million shares for A$3.65 million to pay contractor bills for changes made to shipping contracts. Arrow Energy proposes to acquire Pure Energy for A$2.70 cash and 1.21 Arrow shares.

[R]3:00AM New York, 7:00PM Sydney - Fortescue sells shares to pay contractors. Rio Tinto cuts pig iron production.[/R]

Australian stocks fell after Fortescue Metals Ltd. said it issued 1.55 million shares for A$3.65 million to pay contractor bills for changes made to shipping contracts.

In Sydney trading ASX 200 index fell 1.6% or 58.3 to 3,557.40. Of the ASX 200 index stocks, 68 rose, 120 declined, and 12 were unchanged. Babcock & Brown led advancers in the index shares with a rise of 44.2%.

Fortescue Raises $3.65 million

The Weekend Australian reported on Saturday that Fortescue Metals Ltd. has issued 1.55 million ordinary shares to raise A$3.65 million to pay contractor bills.

Three shipping companies have sued Forescue for contracts modifications.

On Friday last week, the iron ore miner reported that it had engaged maritime legal advisers to fight arbitration claims against in the company in the U.K. The shipping companies have also raised claims in the U.S. on the company accounts.

“Fortescue advises that to date, less than $1.5 million has been frozen and Fortescue does not anticipate that the total value of funds frozen in this manner will be material,” the company noted in a statement on Friday.

Rio Suspends Pig Iron Production

Rio Tinto reported today that it is suspending pig iron production from its HI smelt plant in Kwinana as there “is not sufficient demand to justify operating for the next three months.”

The plant has a capacity of 800,000 tons a year.

Rio plans to cut 14,000 staff and slash capital expenditure by US$5 billion, including reducing debt by US$10 billion by the end of 2009.

Gainers & Losers

Babcock & Brown led advancers in the ASX 200 index shares with a rise of 44.2% followed by increases in Tishman Speyer of 19.1%, in Mount Gibson Iron of 17.3%, in Australand Properties of 13.6%, and Macquarie Media of 13.1%.

Babcock & Brown increased after Babcock & Brown Power said it is currently reviewing submissions from third parties to acquire the business.

Fortescue Metals led decliners in the ASX 200 index shares with a fall of 20.6% followed by losses in Macquarie Office of 18.6%, in Pacific Brands of 12.3%, in Alumina Ltd. of 12.3%, and Arrow Energy Ltd. of 11%.

Fortescue Metals dropped on reports that the company issued shares to pay contractor bills.

Arrow Energy slid on news that it will acquire Pure Energy Resources for A$673 million.

Commodity stocks fell as oil prices retreated $2.35 to $33.9 per barrel and gold prices declined $23.20 to $837.4 per ounce. Sino Gold dipped 7.5%, Felix Resources declined 7.4%, Newscrest Mining plunged 6.2% and Roc Oil plummeted 7.3%.

Arrow Energy to Acquire Pure Energy for A$673 Million

The Australian reported today that Arrow Energy will acquire Pure Energy through a cash payment of A$2.70 per Pure share and 1.21 Arrow shares.

The Arrow offer is at 81% premium to Friday closing price of Arrow share and 147% premium to its one-month volume weighted average share price. Independent directors of Pure have unanimously approved the bid.

Arrow currently has 19.9% stake in Pure Energy.