Iron ore giant Fortescue Metals has signed a deal with the China Iron and Steel Association and Baosteel Group to set prices for ore sold during the second half of the year.
Fortescue has also stitched up a new financial deal, with Chinese financiers set to provide the company with up to $US6 billion in finance by 30 September.
Shares in Fortescue jumped 4% to $4.75, adding $151 million to the fortune of founder Andrew Forrest. The shares have since retreated to be trading around $4.65.
“The ongoing market speculation has promoted unprecedented iron ore and steel price volatility, which in turn has created extreme production uncertainties for Chinese steel mills and for suppliers setting individual contracts with those mills,” Forrest said in a statement.
“This agreement eliminates that price uncertainty, sets a solid platform for Fortescue to deliver increased product into China and affirms our close working relationship with CISA and all Chinese steel mills.”
Shares down after disappointing Wall Street results
The Australian share market has opened lower today due to weaker results from Wall Street last week, where gloomy economic data reduced hopes of a quick recovery.
The benchmark S&P/ASX200 index was down 34.2 points or 0.77% to 4423 at 12.00 AEST. The Australian dollar also dropped to US82c.
Commonwealth Bank shares dropped 2.9% to $45.64, as NAB shares also fell 2.4% to $27.09. ANZ shares fell 2.3% to $20.26, as Westpac dropped 1.3% to $24.08.
Shares in iiNet, the country’s third largest internet service provider, have jumped 6% to $2.12 as the company announced a 44% jump in profit to $25.6 million.
Managing director Michael Malone said the company’s 123% growth recorded in naked DSL services, which operate as normal DSL services but do not require phone line rental, helped boost the company’s results.
“We continue to deliver on our commitment to be the leading innovator and challenger in the Australian telecommunications market,” iiNet managing director Michael Malone said.
While the company faces harsh economic times, Malone said, total revenue has increased by 67% to $418.3 million, while earnings before tax, depreciation and amortisation has also increased 42% to $67.2 million.
Ken Henry sees optimism in budget forecasts
Treasury secretary Ken Henry has told a committee meeting in Sydney that there are good reasons for optimism in the Government’s budget forecasts which will be updated later this year.
While the Government forecasted the unemployment rate to peak at 8.5% next year, recent economic data has shown the Australian economy has proved more resilient than expected.
Henry also said the Australian economy could attract greater shares of capital flows as the global economy continues to recovery, according to Bloomberg.
Meanwhile, health insurance group NIB Holdings recorded an 11% in full year net profit due to negatives returns on its investment portfolio.
The company’s net consolidated profit fell 11% to $23.8 million for the year ending 30 June, after recording $26.7 million in the previous year.
“Our forecast net policyholder growth for FY10 is between 4-6% with an underwriting margin of 5-5.5%, which is within our target range and a pre-tax underwriting profit of between $45-50 million,” managing director Mark Fitzgibbon said in a statement.
“We have a very sound foundation and are very confident about being able to continue our better than system growth and improve our underlying profitability.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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