Roy Hill snubs Fortescue assets
The iron ore empires of Andrew Forrest and Gina Rinehart appear unlikely to co-operate over railways and ports, according to the man running Mrs Rinehart's ambitious Roy Hill project in the Pilbara.
Chief executive of Roy Hill Holdings Barry Fitzgerald admitted he had studied the sale process that Mr Forrest's Fortescue Metals has been running for a stake in its port and rail assets.
But he poured cold water on the notion Roy Hill might emerge as the buyer of a 30 per cent to 40 per cent stake in Fortescue's infrastructure holding company, telling a conference in Perth Roy Hill would prefer to control its own infrastructure assets.
Mr Fitzgerald is charged with developing Australia's next major iron ore mine - plus port and rail solutions - at a time when iron ore prices appear to be past their peak.
But he said the project, estimated to cost between $US7 billion ($6.7 billion) and $US10 billion, was being assessed against long-term iron ore price estimates, rather than the volatile spot price.
Roy Hill has been pursuing funding support for the mine for several months, and Mr Fitzgerald said that process should be complete by the end of the year. He added 50 per cent of the mine's future supply was already tied to offtake agreements.
Fortescue's rail and ports sale is expected to raise about $US3 billion for the company, and was expected to be concluded about this time.
Fortescue chief executive Nev Power told a conference in Hong Kong the sale of a minority stake in the infrastructure assets was progressing well, and a short-list of candidates featured pension funds and infrastructure companies.
He did not mention mining companies but did suggest the process could be completed by June.
Investors continued to punish iron ore stocks with another round of fierce selling.
The catalyst this time was not movements in the benchmark iron ore price - which remained steady at $US134 per tonne - but rather a decision by Goldman Sachs to downgrade its iron ore price forecasts for the next three years.
Goldmans had previously been one of the more bullish iron ore forecasters with its prediction the benchmark price would average $US144 a tonne this year. The revised forecast of $US139 a tonne remains relatively bullish but the downgrade was enough for Goldmans' British team to change its Rio Tinto rating to "conviction sell".
Goldmans' Australian analysts retain a "neutral" rating on Rio.
The ensuing rout on European markets spread to the ASX on Wednesday morning where shares in Rio, BHP Billiton, Fortescue and Atlas Iron all lost several percentage points. Much of the gains made by the iron ore exporters over Christmas have been erased, with the value lost since Valentine's Day topping 15 per cent for BHP, 20 per cent for Rio and about 30 per cent for Fortescue. The benchmark iron ore price has lost closer to 15 per cent of its value over that time.
Goldmans argued increases in iron ore supply were emerging faster than first thought which would result in a "structural oversupply" of iron ore in 2014.
Goldmans predicted an iron ore price of $US115 per tonne next year and $US80 in 2015.
Malcom Maiden— Page 36