Resource News

Fortescue wins case against Australia’s regulator

SYDNEY – Fortescue Metals Group Ltd and its CEO Andrew Forrest have won a court case brought by Australia’s securities regulator, which alleged the company had misled shareholders, Fortescue said on Wednesday.

The decision removed a threat that Forrest could be forced off the board of the company he founded on the promise of breaking a duopoly on iron ore mining in Australia.

The Australian Securities and Investments Commission (ASIC) had brought the suit, claiming Forrest misled shareholders by saying agreements in 2004 with Chinese companies were legally binding when they were only preliminary.

“While the case has obviously been a distraction, it has not in any way affected our plans to continue building Fortescue as one of the world’s major iron ore producers and exporters,” Forrest said in a statement.

“We are pleased we can now move on and continue to do what we do best, which is to develop and build iron ore projects for the benefit of our shareholders, staff, customers, the communities in which we operate, and Australia,” he added.

ASIC said separately it was assessing whether to appeal.

ASIC had sought civil penalties of up to A$6 million ($5,3 million) against Fortescue and A$4,4-million against Forrest, whom they also wanted disqualified as a company director.

At the heart of the allegations were “framework agreements” Fortescue signed with three Chinese state-owned companies in late 2004 for construction work.

In its statements released through the Australian Securities Exchange, Fortescue described the agreements as “binding contracts”. ASIC had claimed the contracts were little more than agreements to consider agreements.

Fortescue had denied the allegations, arguing all of its disclosures were correct at the time and that it believed the deals would be converted to binding contracts.

Fortescue shares closed 0,2 percent higher on Wednesday, lagging a 0.8 percent gain on the broader stock index.

A promise to turn rust-red iron ore into gold for investors priced out of the shares of established iron ore miners Rio Tinto and BHP Billiton transformed Forrest from a “penny stock” entrepreneur into a multi-billionaire.

Forrest, who battled a bad stutter as a boy and who spent summers as a jackeroo, or cowboy, near aboriginal outposts, portrays Fortescue as a David to the international Goliaths, Rio and BHP, who have long dominated Australia’s ore industry…read more at the Mining Weekly