Twiggy pitches to Packer, Indians

Twiggy pitches to Packer, Indians
Kevin Andrusiak July 14, 2007

FORTESCUE Metals Group is poised to pull off one of the biggest investment coups in domestic resources history.

James Packer and Indian interests are set to back Andrew "Twiggy" Forrest's dream of breaking the Pilbara iron ore duopoly held by Rio Tinto and BHP Billiton.

Mr Forrest was expected to give Mr Packer, Australia's richest man, a private briefing on Fortescue's ambitions in London last night as the company sought to raise $US300 million ($346 million) in new equity to partly fund a dramatic expansion of its $3.7 billion Chichester Ranges project in Western Australia's iron ore heartland.

It comes after Mr Forrest toured London financial institutions spruiking the new equity placement on Thursday and Friday.

Mr Forrest will also promote the placement to billionaire metals traders David and Simon Reuben who are collectively thought to be worth $11 billion. The pair once controlled about 50 per cent of the Russian aluminium industry before selling out in 2000 to concentrate on Britain's property market.

But Mr Forrest's expected meetings with Arcelor Mittal representatives, possibly company president and steel magnate Lakshmi Mittal, would mark a dramatic development for Fortescue, which previously has been dedicated solely to the Chinese market.

Arcelor Mittal, which has headquarters in Luxembourg and is controlled by Mr Mittal, the world's fifth-richest man, trumpets itself as the world's most global steel company but is yet to make a mark on the booming Australia iron ore landscape. It is understood that Mr Mittal is seeking an offtake arrangement with Fortescue, which has targeted a production rate of 45 million tonnes a year, before ramping that up to 100 million tonnes by 2010 and 200 million tonnes a year "as soon as possible".

That would put Fortescue on a similar tier to iron ore heavyweights Rio Tinto and BHP Billiton as it eyes an expansion of known resources to 4 billion tonnes across its 40,000sqkm of tenements.

FMG representatives could not be reached for comment but the company could have easily placed the $US300 million with London firms, according to sources close to the deal. So strong is the interest in London, coming off the back of Rio Tinto's $US37.1 billion bid for Alcan and a mooted 25 per cent rise in iron ore price contracts for next year, that there is a good chance the equity placement will be increased to around $US450 million.

It is expected the shares will be placed at around the $37.00 mark, which will effectively put a floor price under the stock -- of which Mr Forrest currently owns about 38.5 per cent.

A fully placed $300 million offering at $37 would see about 9.3 million new shares issued and have only a marginal dilutionary effect.

"If James Packer doesn't take any stock, I will walk home from London," one insider said.

Mr Forrest, who himself has a paper fortune of $4.05 billion from his Fortescue stake, has developed a close personal friendship. He was placed near the front row in seating at Mr Packer's nuptials to model Erica Baxter in France last month.

Mr Packer has also had a personal tour of Fortescue's operations, which remain on track to deliver their first direct ore shipment in May next year, if contractors can build a 260km railway line to its Port Hedland facilities.

Fortescue's shares remained in a trading halt yesterday at $39.50.

http://www.theaustralian.news.com.au/story/0,24897,22070664-643,00.html