Fortescue eyes 25 pct sale of iron ore JV to BC Iron

Fortescue Metal Group

BC Iron, the smallest among a tight circle of iron ore miners in Australia's Pilbara region, is in talks with Fortescue Metals Group to acquire majority control over its Nullagine joint venture.

The deal, to cost A$190 million ($199.30 million), aims to

boost BCI's stake to 75 percent from 50 percent now and come into effect Jan. 1, 2013, BC Iron said.

Separately, Fortescue said it did not consider the sale

material to its operations.

Fortescue stock climbed more than 6 percent on word of the potential sale, outpacing gains in the broader market.

BC Iron was placed on a voluntary trading halt ahead of the market opening.

Fortescue is among the world's largest iron ore miners,

while Nullagine remains BCI's key asset. The joint venture was formed in 2009 to enable BCI to ship ore on a Fortescue-owned rail line leading to the Indian Ocean.

As of the end of June, the mine was estimated to hold 42.4 million tonnes of ore, grading 57 percent iron content.

Output from the joint venture is slated to rise to around 6

million tonnes annually in fiscal 2013 million tonnes, versus

3.5 million tonnes in fiscal 2012.

"At the time the joint venture was formed, people looked at the deal as very favourable to FMG and questioned why BCI was essentially giving away half of the project, but at the end of the day, BCI is a 50 percent stakeholder in a 5 million tonne per annum operation," said Chris Drew, a mining analyst for RBC Capital Markets.

"Not a lot of other juniors have actually gone into

production," Drew said. Fortescue has already said it was looking to sell some non-core assets, with BCI the likely buyer of Nullagine. In September, Fortescue restructured $5 billion in debt from a total of $12.7 billion .

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