Fortescue says its first iron ore heads to China

SYDNEY, May 15 (Reuters) - Fortescue Metals Group Ltd (FMG.AX) on Thursday said it had shipped the first of a planned 55 million tonnes of iron ore to China, breaking the hold of heavyweights BHP Billiton Ltd/Plc (BHP.AX)(BLT.L) and Rio Tinto Ltd/Plc (RIO.AX)(RIO.L).

Fortescue, whose billionaire founder, Andrew Forrest, has portrayed his company as a David to the industry's Goliaths, said the 180,000 tonne shipment was bought by Baoshan Iron and Steel Co (600019.SS), China's biggest steelmaker.

The miner was in the process of completing full commissioning of its mine, which will see annual output of 55 million tones of ore at full speed, Forrest said.

"Once this project is fully completed, the mine, rail and port operations will be increased to allow for production to be increased to well over 100 million tonnes a year," Forrest said in a statement.

Fortescue shares were up 4 percent to A$9.72, outpacing gains in the wider S&P/ASX200 .AXJO index.

The stock has more than tripled in the past year as iron ore prices have soared and the company readied its initial shipment.

Fortescue remains locked in legal battles with Rio and BHP over access to their railways and ports in the Pilbara region in western Australia, which both companies rely on to ship hundreds of millions of tonnes of ore annually and refuse to share.

Discovered by chance in 1952 by a prospector, Lang Hancock, in a low-flying plane, the Pilbara is believed to be the world's single largest deposit of iron ore. Hancock went on to make hundreds of millions of dollars selling off rights to his find.

Chinese steel mills' insatiable appetite for iron ore to feed a growing steel industry has helped push prices higher for six straight years, prompting a number of up-start companies to peg ground in the Pilbara.

The Australian newspaper reported earlier this week that three Chinese companies, including Baosteel, were looking at taking stakes in Fortescue.

A promise to turn rust-red iron ore into gold for investors transformed Forrest last year from a penny stock mining entrepreneur into Australia's richest man, worth more than $7 billion.

Iron ore mining is a low-margin, high-cost business, where hundreds of millions of tonnes of material must be dug up and transported by railway to distant ports.

It is also one of the key reasons behind BHP's BL.L(BHP.AX) unsolicited takeover offer for Rio (RIO.L)(RIO.AX). Rio has rejected the offer of 3.4 BHP shares for every Rio share share.

In reaction to critics who said Fortescue was unlikely to meet its self-imposed mid-May deadline to make its maiden shipment, Forrest earlier this year said he would personally shovel the ore onto the ship if necessary. ($1=A$1.07) (Reporting by James Regan)