Australia's third biggest iron ore exporter, Fortescue Metals Group Ltd, continues to be talks with Chinese groups to secure as much as $6 billion funds to expand.
"We have held discussions with major Chinese financiers to extend credit to around $5.5 billion to $6 billion to Fortescue," Chief Executive Officer Andrew Forrest said yesterday.
Fortescue said earlier on Monday that it wants to have the financing secured by the end of September.
Fortescue has been seeking funding as a cash squeeze and lower iron ore prices forced it to put expansions on hold. The Perth-based company may need between $3 billion and $4 billion to proceed with plans to almost double output, Hunan Valin Iron & Steel Group, its second-largest shareholder, said in May.
Securing financing is a condition of Fortescue's agreement with China's largest steelmaker Baosteel Group Corp and the China Iron & Steel Association (CISA) to cut contract iron ore prices by 35 percent.
The price agreement is deeper than the 33 percent reduction offered by Rio Tinto and BHP, the largest two exporters of Australian iron ore, and 47 percent less than the current spot price for benchmark ore from Australia.
The steel association said it wants to apply the price agreement to all the ore purchased by the country, eliminating differences between contract and spot prices.
"CISA is very much a part of China's correct belief that their people deserve a stable iron ore pricing system and not one that has a benchmark with responsible supplies and then a speculative and hugely volatile and expensive price for short term supplies," Forrest said. "It is clearly not in China's best interests to have this two-tiered, dysfunctional system."
Fortescue will sell 20 million tons of iron ore in the six months ending Dec 31, and China will give it priority to negotiate 2010 prices, the Perth-based company said. China bought 444 million tons of ore last year from suppliers.
Meanwhile spot iron ore vessel bookings from Brazil to China slowed in the first half of August after July shipments made up for reduced supplies from Australia to keep up record purchase rates by the world's biggest iron ore buyer.
Shipments from Brazil, China's second-largest iron ore supplier after Australia, stood at 5 so far this month, down sharply from a record 39 last month and an average of around 20 in the year's first half, according to data specialist AXSMarine.
Vessel bookings from Australia's main iron ore ports to China stood at 15 so far this month, versus an average of 40 in the second quarter and 31 in July.