Chinese firms said to approach Fortescue on infrastructure stake

[SYDNEY] Hebei Iron & Steel Group Co and Tewoo Group Co have approached Fortescue Metals Group Ltd about acquiring a stake in the iron ore producer's infrastructure assets, people with knowledge of the matter said.

The state-owned Chinese firms are separately talking to Fortescue about investing in the infrastructure serving its operations in Western Australia's Pilbara region, the people said. They may also consider buying stakes in some of Fortescue's mines, two of the people said, asking not to be identified as the information is private.

Fortescue, controlled by billionaire Andrew Forrest, said in March it would consider selling minority stakes in mines, railroads and ports. Iron ore prices have tumbled to the lowest since at least 2009 as the largest suppliers, including Rio Tinto Group, expanded production just as economic growth slowed in China.

Australia's third-largest iron ore producer, which has US$7.2 billion in net debt, abandoned a previous plan to sell a stake in its infrastructure assets in 2013 after saying the offers it got didn't meet its objectives for value and terms. In March it sold US$2.3 billion of bonds after halting an earlier, larger offering amid the rout in commodity prices.

Largest Steelmaker Talks with the Chinese firms are at an early stage and may not result in a deal, the people said. Luke Forrestal, a spokesman for Fortescue, declined to comment. Representatives for Hebei Iron & Steel and Tewoo declined to comment.

Fortescue, which has a market value of US$4.1 billion, has held talks with Baosteel Group Corp and Japanese firms about selling a stake in some of its mines, people familiar with the matter said in June.

Hebei Iron & Steel, China's largest steelmaker by production capacity, produced 47.1 million metric tons of steel and booked sales of 280.6 billion yuan (S$62.2 billion) last year, according its website.

State-owned Tewoo, based in the northern Chinese port city of Tianjin, runs businesses including commodities trading, logistics, financial services and real estate. It had 114.8 billion yuan of total assets at the end of 2013, its website shows.

BLOOMBERG