New big Pilbara iron ore producer Fortescue Metals (ASX: FMG) has forged deals that provides $A558 million ($US364 M) in a new share allotment plus a co-operative agreement with Hunan Valin on exploration and an added offtake agreement that helps justify re-opening the planned second stage development involving a second mine at Christmas Creek.
Hunan Valin will also purchase 275 M shares from an established institutional shareholder - reportedly American hedge fund Harbinger Capital Partners -- taking its total stake in the company to more than 16%.
Valin's chairman Li Xiaowei is expected to join the Fortescue board.
But while there is speculation that more funds will be sought there were reports that a mooted $A500 M ($US326 M) open market raising would at least be delayed, given flat market conditions.
Fortescue's high profile chief executive, Andrew Forrest, said of the Valin deal: This placement provides Fortescue with a cornerstone Chinese equity partner which will only enhance our ability to grow and prosper.
It will provide a solid base from which to launch Fortescue's expansion from 55 million tonnes per annum to 120 Mtpa, when market conditions reach a level we are confident will underpin that expansion, he said.
While the Hunan Valin deal is subject to Australia's Foreign Investment Review Board it is unlikely to give Australia's Federal Treasurer Wayne Swan less palpitations than China's inroads into two of Australia's largest mining houses - Rio Tinto and OZ Minerals Ltd.
Earlier this month Mineweb pointed to the mounting pressure in Canberra being created by the selling off of Australia's mining farm. In the case of Rio Tinto, Chinalco's bid is throwing a lifeboat at the debt-wracked Rio while metal house Minmetals is now seen as the only likely saviour to prevent OZ Minerals from succumbing to bank debt.
Once seen as a brash promoter, Forrest is showing good corporate and political chess playing skills. The Hunan Valin cooperation agreement does not see that company move close to the 19.9% takeover provisions trigger but secures what may well be a joint venture agreement on developing Fortescue's other emerging iron ore projects in the Pilbara, perhaps even participating in the now started Birthday Creek mine.