By Barry Fitzgerald
ANDREW Forrest's Fortescue Metals is in a trading halt before an expected release on Monday on the completion of a ''commercial negotiation''.
The halt follows speculation earlier this week that China's sovereign wealth fund, China Investment Corp, was poised to pump $1 billion into Fortescue through the issue of convertible bonds.
In response to the CIC speculation, Fortescue told the ASX on Wednesday that it had a ''clear expansion objective'' of increasing production to an annual rate of 95 million tonnes of iron ore within a ''medium-term horizon of 2012''.
''As part of its planning program to achieve this profile, Fortescue is reviewing its finance options,'' the company said. It said the talks were confidential and incomplete.
Production from the group's Pilbara operation is about 35 million tonnes a year, with a plan to boost output to an initial target of 45 million tonnes, firmly establishing the group as the third biggest behind Rio Tinto (200 million tonnes) and BHP Billiton (130 million tonnes).
Fortescue reported on Monday that it was holding cash of $US654 million ($A790 million). While that is enough to tide the group over in the event that there is a prolonged period of lower iron ore prices, it represents a fraction of the $US3 billion it is estimated would be required to reach the annual production rate of 95 million tonnes.
It is only at the much higher production rate that Fortescue could hope to achieve the economies of scale that Rio and BHP have in the Pilbara.
Before the trading halt, Fortescue shares were trading at $4.45 - 7 per cent higher than the closing price on Monday.