Fortescue Metals and Formosa Plastics Group have announced a $1.15-billion investment by Formosa in FMG Iron Bridge Ltd., which is jointly owned by Fortescue (88%) and a subsidiary of China’s Shanghai Baosteel Group (12%). FMG Iron Bridge is developing the Iron Bridge project 100 km south of Port Hedland in Western Australia. The project is based on the North Star and Glacier Valley iron ore deposits, which have combined iron ore resources of 5.2 billion mt.

Formosa Plastics is Taiwan’s largest private company and is currently investing in the construction of a 22-million-mt/y integrated steel mill at Ha Tinh, Vietnam. The greenfield Ha Tinh project is the largest of its kind in the global steel-making industry and is expected to begin production in 2015.

Formosa Plastics, through its subsidiary Formosa Steel, will acquire a 31% unincorporated interest in the FMG Iron Bridge joint venture for $123 million and fund the first $527 million of capital expenditure for Iron Bridge project development. This funding will fully cover construction of stage one of the project, which will begin on completion of the transaction and has an estimated capital cost of $340 million.

If approved, stage two would be funded by the balance of Formosa’s initial funding and a contribution of the next $1.05 billion from FMG Iron Bridge Ltd., followed by proportional contributions of 31% from Formosa Plastics and 69% from FMG Iron Bridge Ltd.

Formosa Plastics will purchase up to 3 million mt/y of iron ore from the Iron Bridge project at market prices to supply the Formosa Ha Tinh steel mill when it is commissioned. The company may also elect to prepay $500 million to Pilbara Infrastructure Pty. Ltd. to access Fortescue’s port facilities at Herb Elliott Port under separate infrastructure access arrangements.

Construction of Iron Bridge stage one is expected to take 12 months, with first production of 1.5 million mt/y of 66% Fe mHematite product starting in early 2015. (mHematite is magnetite that has been partly oxidized into hematite but that retains magnetic properties and, therefore, is amenable to magnetic separation.)

Development of the 9.5-million-mt/y Iron Bridge stage two, which will produce 68% Fe magnetite concentrate, remains subject to joint-venture approval, with construction currently expected to begin in 2015.

Regarding the new Iron Bridge agreement, Fortescue Chairman Andrew Forrest said, “This transaction brings together Fortescue, Baosteel and Formosa Group, a company that looks set to become the new force in steel‐making in southeast Asia. We are truly excited to be partnering with Formosa in this important next chapter of our mutual development.” 

Port Expansion Completed: In other news from Fortescue, the company reported in mid-August that a $2.4-billion expansion of its port facilities in Port Hedland, Western Australia, has been completed. The expansion lifts Fortescue’s iron ore export capacity to 155 million mt/y, matching the mine production rate it expects to achieve by year-end 2013 (E&MJ, August 2013, p. 16).

The port expansion included construction of two new berths, a second and third outloading and inloading circuit, two shiploaders, two reclaimers, one stacker, two train unloaders, 15.5 km of conveyor systems, transfer stations, drive stations, two sample stations, power and control systems, and associated infrastructure.

Fortescue expects to begin the construction of a fifth berth later this year.

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