EXPECTATIONS that Fortescue Metals Group will have a subsidiary listed on Asian markets before the end of the year have been boosted by a new spinout deal with one of China's biggest steel producers.
In a deal warmly received by Australian investors, Fortescue announced that two of its Pilbara magnetite assets would be shifted into a new Hong Kong-based joint venture with Baosteel.
While there was no official suggestion yesterday that the new entity to be known as FMG Iron Bridge would be floated on the Hong Kong stock exchange, most analysts saw the development as a precursor to a listing later this year.
While Fortescue insists that a Hong Kong listing is just one of several funding options under consideration, the company's international projects director, Michael Masterman, was revealed in April to have told Beijing investors that a listing could take place in the September quarter of 2012.
Fortescue will initially hold 88 per cent of FMG Iron Bridge, in what is effectively a reorganisation between existing partners.
FMG Iron Bridge will take ownership of the Glacier Valley magnetite tenement (owned 65 per cent by Fortescue and 35 per cent by Baosteel) as well as the Northstar magnetite tenement, which was fully owned by Fortescue.
The deal will leave FMG Iron Bridge with a 3.2 billion-tonne magnetite resource, assuming it wins approval from Australian and Chinese government regulators.
Fortescue is already spending $US8.4 billion, almost tripling its Pilbara export operations, and analysts said the spinout with Baosteel would enable the company to develop the assets without adding pressure to its balance sheet.
The market appeared to like the deal, taking FMG shares higher on a day when the main Australian index closed lower.
Fortescue shares closed 13?, or almost 3 per cent, higher at $4.68 despite other iron ore-focused stocks such as Atlas Iron and Rio Tinto closing lower.