* In talks with strategic, financial investors
* Fortescue looks to pay down debt
* Says infrastructure, mining efficiency must not be
By Sonali Paul
MELBOURNE, Dec 17 Australia's no.3 iron ore
miner, Fortescue Metals Group, is in talks to sell a
minority stake in its multi-billion dollar port and rail assets
as it looks to cut debt and build new mines in a world of weaker
iron ore prices.
Analysts estimate Fortescue could fetch as much as $5
billion for a 49 percent stake, but that would depend on how a
deal is structured and what rate another owner could charge
companies for access to the rail line.
Fortescue said it has received strong interest in the
business from strategic and financial parties in the port and
rail assets, housed in a unit called The Pilbara Infrastructure
(TPI), which has led to talks with a small group of investors.
"They are also attracted by the fact that TPI is the only
provider of third-party infrastructure in the Pilbara and the
logistics chain is fully operational. This provides an
outstanding investment opportunity," Fortescue Metals Chief
Executive Nev Power said in a statement.
The company is looking to accelerate paying down debt after
recently putting the brakes on its ambitious iron ore expansion,
refinancing $5 billion in debt, and selling power and mine
assets after iron ore prices hit a three-year low of $87 a tonne
in September. Prices have since rebounded to $129.
"If you could see them take $2-$3 billion off their balance
sheet, you could see a much easier path to complete their
expansion and get to 30-40 pct gearing by 2014 on fairly
conservative iron ore prices," said Chris Drew, an analyst at
RBC Capital Markets.
A senior executive had recently said the port and rail
assets are "incredibly valuable" and stressed the company would
only sell a stake in the business if it could retain total
control over the operation.
Power said on Monday the sale would only go ahead at "full
and fair market value and on the basis that the current
efficiency of infrastructure and mining operations are not
There has been speculation that billionaire Gina Rinehart's
Roy Hill iron ore project and Atlas Iron may be
interested in buying stakes in TPI.
However, Rinehart's Hancock Prospecting, a 70 percent owner
of the $10 billion Roy Hill project, has said it wants to build
its own rail line.
Atlas Iron, which needs access to a rail line to get to its
production goal of 46 million tonnes a year, could seek access
to Fortescue's line if it opts against building a rail line
under study with rail operator Aurizon Ltd, formerly
called QR National.
Analysts said pension funds and infrastructure companies,
like Brookfield Infrastructure Partners, whose
Brookfield Rail arm runs rail lines in Western Australia, could
be interested in a stake in the port and rail assets.
Fortescue has appointed Lazard and Macquarie Capital to
advise on the transaction.
Fortescue's shares, which last traded at A$4.33, have inched
up 0.9 percent so far this year, heavily lagging a 13 percent
gain in the broader market as it has been hit by a slowdown in
its sole customer, China.