Vale, Fortescue plan pact to boost China market share

Vale is in the process of phasing out higher cost, lower quality production from its older mines in Minas Gerais state.

Fortescue did not expect to run into any trouble with competition regulators in China or elsewhere, although analysts said opposition in China could be a big hurdle.

“There is no reduction in competition from this. If anything it improves the competitiveness of supply to the Chinese steel industry,” Power said, adding that the companies had already started talks with regulators.

Fortescue, which has been racing to cut costs and slash debt to help weather the collapse in iron ore prices over the past two years, said it did not consider issuing new shares to Vale despite $6.1 billion net debt.

The company, controlled by founder and chairman Andrew “Twiggy” Forrest, has long been reluctant to water down Forrest’s one-third stake and done everything it could to raise funds without issuing new equity.

Fortescue’s shares rose nearly 7 percent after the announcement to a 16-month high, adding to a stunning 24 percent gain on Monday when iron ore prices soared on expectations of a short-term jump in steel output in China.

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