Billionaire Forrest leads BlackRock buying iron ore

AUSTRALIA’S RICHEST man Andrew Forrest is buying iron ore shares at a time when producers are at their cheapest level in three years.

Mr Forrest, founder of Australia’s third-biggest iron-ore exporter Fortescue Metals Group, spent A$135 million (€113 million) buying stock in his company in June. BlackRock, the world’s biggest money manager, this month spent about A$94 million (€78.5 million) to increase its Fortescue stake.

New iron ore mines and expansions are being delayed by rising costs at the same time as data this week showed imports by China, the world’s biggest steelmaker, rose to a record. The data came the same month a survey modelled on the US Federal Reserve’s Beige Book showed China’s economy is in better shape than official statistics suggest.

“It’s not just Fortescue, there are other iron ore companies all over the world that are offering great value,” Evy Hambro, portfolio manager of BlackRock’s $11 billion World Mining Fund in London, said.

“You’ve had a very clear signal sent to the market by Andrew Forrest that he’s putting his money where his mouth is in terms of increasing his holding.”

Meanwhile, loan financing for Gina Rinehart’s $10 billion Australian iron ore project is being held up by talks on capping construction costs, sources said, threatening to push the project back after delays caused by a legal feud in the mining magnate’s family.

The Roy Hill project, racing to come on line in late 2014 to beat a risk of iron prices sliding, is looking to raise between $6 billion and $7 billion in project financing, with more than half seen coming from export credit agencies in Japan, South Korea and China, four sources with knowledge of the deal said.

Roy Hill and potential lenders are concerned about the risk of costs escalating further, as has happened at other Australian resource projects, driven by a scramble for staff and equipment.

Roy Hill, targeting 55 million tonnes a year of iron ore in the Pilbara region in Western Australia, will make Ms Rinehart’s Hancock Prospecting Australia’s fourth-largest iron ore miner, behind Rio Tinto, BHP Billiton and Fortescue. – (Bloomberg/Reuters)