China appears to be embarking on a global offensive to secure iron ore supplies.
Its $200 billion sovereign wealth fund, China Investment Corp., and coal miner China Shenhua Group are reportedly in talks to take a sizable stake in Fortescue Metals, a major Australian iron ore producer that is building its own rail line in Western Australia to the sea, seeking to circumvent the rail duopoly in the region held by Rio Tinto (nyse: RTP) and BHP Billiton (nyse: BBL).
The news comes on the heels of a stunning share raid Friday by Alcoa (nyse: AA) of the U.S. and Chinalco in which they took a joint 12% stake in Rio Tinto, putting them in position to potentially block a takeover of the miner by BHP. (See: " China Takes A Shine To Rio")
On Monday, Fortescue Metals, the third-largest iron ore producer in Western Australia after BHP and Rio Tinto, confirmed it “has held confidential discussions with a range of potential strategic equity investors.” Its statement was in response to inquiries from Australian regulators sparked by an article Monday morning in Hong Kong's South China Morning Post that claimed China Investment Corp. and China Shenhua, China’s largest coal miner, were seeking to buy a 15.85% stake in Fortescue Metals for about $2 billion.
London's Sunday Telegraph also reported over the weekend that state-controlled China Development Bank had expressed interest in buying a 35% stake in the miner Xstrata (other-otc: XSRAF) from Swiss commodities firm Glencore.
China Development Bank financed Chinalco's involvement in its joint $14 billion share raid with Alcoa on Rio Tinto....MORE