China Investment Corporation (CIC), China's US$200 billion sovereign wealth fund, is in talks with Australian iron ore miner Fortescue Metals (FMG) over a convertible bonds transaction worth more than US$1 billion; the funds will finance FMG's future expansion, according to a Reuter's report, citing two insiders in the deal.
CIC officials declined to make any comment on the deal but an anonymous banker said "Compared with CIC's earlier attempted buyout plan, their participation via convertible bonds is a more cautious investment strategy."
CIC's Chairman and CEO Lou Jiwei is on record as saying CIC aimed to be a long-term investor in FMG and is not seeking control although there were rumours last year that CIC had tried to buy 15.85 percent of FMG's stock.
In February this year, Chinese Valin Iron & Steel invested AU$1.2 billion in FMG, becoming FMG's second largest shareholder, and gaining a seat on the FMG Board.
FMG's annual report published on August 10 shows the company is back in the black with an net profits of US$500 million, compared with last year's loss of US$770 million.
Despite the improved performance, the market prospects are still gloomy for FMG, as shown by the fall in its share price after the report was released.
FMG also said in the report that the company will not consider fund raising or expansion until it has a clear picture of the economic outlook.
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(China.org.cn by Maverick Chen, August 12, 2009)