Jiangsu Yangzijiang Shipbuilding company to produce ore carriers for Australia

Iron ore miner Fortescue has signed a $US473 million loan deal with a Chinese bank to fund construction of its very large ore carriers.

Fortescue Metals Group has signed a $US473 million ($A626 million) financing agreement with a unit of China Development Bank to fund the ongoing construction of eight very large ore carriers (VLOC).

The CDB finance lease facility will fund 85 per cent of Fortescue’s VLOC cost for a minimum period of 12 years, with flexible terms that include early repayment and extension options.

Fortescue chief executive Nev Power called the deal “a significant milestone in our financial strategy, further extending our debt maturity profile while strengthening our capital structure”.

The world’s fourth biggest iron ore exporter has been boosting iron ore shipments in the past few quarters even as larger rivals BHP Billiton and Rio Tinto have trimmed expectations for production growth.

It is also discussing a tie-up with larger Brazilian rival Vale to blend their iron ore at key Chinese ports, which could help them take away market share from BHP and Rio.

The ore carriers are being constructed at China’s Jiangsu Yangzijiang and Guangzhou shipyards, with the first delivery scheduled for November 2016 and the balance through to mid-2018.

Fortescue says the VLOC fleet will help improve load rates, efficiencies and reduce operating costs. When fully operational, the carriers will provide 12 per cent of Fortescue’s shipping requirements.

The new loan facility comes after Fortescue in October said it had slashed net debt to $US4.2 billion by September-end, from more than $US7 billion at the beginning of FY16.

By 1200 AEDT, Fortescue shares were down 3.2 per cent to $6.08 in a weak share market.

Source: FMG inks financing deal for ore carriers

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