Chinese fund to invest in mining giant

Bloomberg

Fortescue, which is in talks with CIC, plans to use some of the proceeds to retire debt, the people said, asking not to be identified. The proposed CIC deal may be in preferred shares paying a dividend, and the payment rate hasn’t been agreed upon, one person said.

This would be CIC’s first major metal investment as the fund seeks to diversify from financial firms. State-owned companies in China, the world’s largest metal consumer, agreed this month to pour $21.2 billion into debt-laden mining companies Rio Tinto Group and OZ Minerals Ltd. to take advantage of a rout in commodity prices.

China’s expansion

"Iron ore will be a hot spot this year in acquisitions and IPOs because China’s steel industry is expanding into raw material supply," said Helen Wang, a Shanghai-based analyst with DBS Vickers.

Fortescue shares fell 2.4 percent to A$2.83 on Feb. 20, and has been suspended from trading since. It has a market value of A$8 billion ($5.2 billion). Fortescue Metals said earlier yesterday it’s in talks for a hybrid funding package with CIC to help fund expansion. Talks are at a "early stage," Morse had said earlier.

The Australian producer is facing a funding shortfall of A$731 million ($472 million) for an expansion, Macquarie Group said yesterday.CIC said Dec. 3 it would avoid investing in foreign financial firms after losing billions on stakes in Morgan Stanley and Blackstone Group.