Fortescue CEO Considers Hong Kong, Shanghai Listings

Australia’s third-largest miner of iron ore, Fortescue Metals Group Ltd., is considering a listing in Hong Kong or Shanghai to entrench ties with Chinese steel mills, Chief Executive Andrew Forrest said on July 17.

“We study the Shanghai market and Hong Kong market all the time,” Mr. Forrest said in an interview. “We’re keeping our iron in the fire there. We haven’t made any decisions as a board, but we are certainly setting up the opportunity,” he said in reference to a possible secondary listing.

An early move would require Fortescue to list in Hong Kong, as authorities in Shanghai have yet to follow through on a plan to launch an international board to enable foreign companies to list yuan-denominated shares.

Listing in Hong Kong could be a risky strategy for Fortescue, amid signs that the market for new offerings in the Asian business hub has stalled. In the past month, at least five companies priced IPOs in Hong Kong at the lower end of their ranges, reduced the size of their offering or canceled listings.

Listing in Shanghai could help Fortescue to sidle closer to the Chinese customers that are the driving force behind its $8.4 billion plan to expand mines in the mineral-rich Pilbara region of Western Australia. In a sign of Fortescue’s growing links with China, chief operating officer Nev Power, who will succeed Mr. Forrest as chief executive next week, said the company has already made yuan-denominated transactions in China in a step toward settling iron-ore contracts in the local currency.

China disclosed plans for the international share board in 2009 as part of its broader agenda to turn the yuan into a global currency and help Shanghai become a major global financial hub by 2020. Although there is no official timetable, Shang Fulin, chairman of the China Securities Regulatory Commission, said last month that “we are ever closer to the launch of the international board.”

Fortescue is behind BHP Billiton Ltd. and Rio Tinto PLC in Australia in terms of iron ore production. Combined, the three mining giants are expected to export about 1 billion tons a year of iron ore from Australia by the next decade, after investing billions of dollars to develop mines.

The resulting economic boom is straining Australia’s limited supply of labor, but Mr. Forrest, who will become chairman when he steps down as CEO, said Perth-based Fortescue isn’t feeling the labor and skills shortages that many resources companies are blaming for cost overruns on projects.

Australia’s Prime Minister Julia Gillard revealed details of a new carbon tax that will force Fortescue and other major polluters here to pay about $24 per ton of carbon they produce, Mr. Forrest said the policy placed a new cost burden on the company.

“Our major cost pressures are energy and taxes,” he said. “The move to make Australia less competitive through the Mineral Resource Rent Tax and carbon tax is the only business threat that really worries Fortescue.”

“Chinese investment most welcome in Western Australia:” state premier

“Chinese investment in Western Australia is increasing and I expect to see Chinese investment continues to grow,” Colin Barnett, state premier of Western Australia, said here on July 12.

In an interview with Xinhua at his office, Barnett said he believes around 80 percent of China’s investment in Australia is put into projects in Western Australia.

“Chinese is now Australia’s most important trading partner, and 70 percent of all Australia’s export to China is from Western Australia as well,” said Barnett during the Boao Forum Perth conference which is focused on energy, resources and sustainable development.

Talking about the bilateral relationship, Barnett, who was elected premier in 2008 and has visited China for several times, said he was pleased to see the cooperation between Australia and China was very close, and China’s business relationship with WA is getting closer year by year.

He mentioned that it was good to see Chinese investment coming into Australia about five or six years ago. It is a bit late comparing with Western countries or Japan in terms of investment in resources sector in Australia, but he was confident to see more investments from China in the years ahead and hope to see that Chinese investments would match some other countries in the future.

“When I was in China, I told political leaders, government officials or state owned enterprises that Chinese investment was very welcome in WA. But I also said that these investment should go to big projects with high quality and the investors should hold these projects for a long term.”

He also encouraged the Chinese investors to focus on natural gas projects in Western Australia, which will help stabilize the price of energy.

“The world is growing rapidly, and urbanization is growing, particularly in Asia. So at this moment the energy demand would stay strong and energy price will stay high,” he added.

At the Boao Forum for Asia business conference in Perth which was closed on July 12 afternoon, Barnett said his state would be the biggest or second biggest producer of liquefied natural gas by 2020, and the production of iron ore will double during this period.

The Western Australia’s economy is dominated by its resources and services sector and largely driven by the export of iron-ore, gold and liquefied natural gas.

Australia says economy solid despite global fears

Australian Prime Minister Julia Gillard said on July 17 she was confident the resources-led economy would remain strong, pointing to solid Asian growth despite uncertainty from the US and Europe.

Consumer sentiment in Australia has plunged to levels not seen since the heady days of the global financial crisis, while Gillard’s plan to place a price on carbon is also thought to have rattled consumers.

“There are some signs of increased risks from Europe and the United States,” Gillard said, adding that Australians were cautious about spending after the global slump and natural disasters in Queensland, New Zealand and Japan.

“I’m very conscious of that but I’m also very conscious that the underlining fundamentals of our economy are strong. We are in the right part of the world, the part of the world where economies are growing.”

Gillard, whose centre-left Labor government has plunged to record lows in polls, said the Chinese economy was growing strongly and Australia had a good budget position, low unemployment and a massive Aus$430 billion (USD 458 billion) in mining investment coming through.

“So I’m very confident in the underlying strength of our economy,” she told the Nine Network.

Gillard defended her decision to go ahead with the controversial carbon tax, which will begin with an Aus$23 per ton\ levy and be replaced in mid-2015 by an emissions trading scheme.

“In terms of timing the change that we need to make for a clean energy future, the time to act is now,” she said.