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China to fund Fortescue port, rail, and mine deal

<p>Three major Chinese government companies are to finance the construction of the $1.85bn, 45m tonnes a year Fortescue iron ore export project, including new port facilities at Anderson Point in Port Hedland. </p> <p>In a deal with ASX-listed Fortescue announced in Beijing on Friday, China Harbour Engineering Corporation (Group) will provide financing, design and construction covering dredging, train unloading, ore stacking, blending, and ship loaders. </p> <p>The port deal follows an agreement in August with China Railway Engineering Corporation to build the railway line and rolling stock between Chichester Ranges and Port Hedland. </p> <p>China Metallurgical Construction is building the mine and benefication plant at the Christmas Creek site on the Pilbara.</p> <p>Drilling in only a small area of Fortescue’s 17,000 sq km tenement holding in the Pilbara has already revealed 1.135bn tonnes of iron ore. </p> <p>Fortescue Metal’s chief executive, Andrew Forrest, said that the three Chinese funded contracts, along with $66m in pre-payments from three Chinese iron ore customers, will limit Fortescue’s initial financing needs to around 10% of the estimated $1.85bn total project cost. </p> <p>Fortescue has contracts with Hebei Wenfeng, Jiangsu Fengli, and Pingsteel totalling 8m tonnes out of an expected 45m tonne annual production capacity. </p> <p>Production will start in 2007. </p> <p>"Our approach has been to ensure that construction risk is carried by the contractors, and that payment by Fortescue only follows practical completion The construction funding significantly enhances the economic value of the project by de-risking the development phase &#8211 often an issue with greenfield project financing," Mr Forrest said.</p> <br />