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Fortescue On the Up After Iron Ore Discovery

Published on March 6, 2011 at 7:13 PM

By Cameron Chai

The shares in Fortescue Metals Group went up after it said that it had discovered a 1 billion metric ton iron ore deposit near its existing mining operations. The shares in the Perth based Australian company were trading at $6.60, 7th Mar 10:48am AEST, on the Australian stock exchange. This is its largest gain since February 14 this year.

The new discovery in the Pilbara region is named Nyidinghu and is located 35 km south of the Cloudbreak operation that Fortescue operates in Western Australia. The project is said to have an inferred resource of 1.032 billion tons of iron ore which is of a grade of 58% iron. It is ideal for steel making purposes.

This comes in line with the company’s mission to triple its iron ore output to supply to steel mills in China. The company is already spending about $8.4 billion on the expansion of its existing projects to cash in on the recent price rise. At present the average price of iron ore has gone up to $138.50 a ton from $67.58 a ton earlier this year.

Fortescue Metals Group released a statement saying that they were commencing a feasibility study with a view to developing this deposit as rapidly as possible. This maiden estimate is expected to grow as further drill results come in. The company now controls almost 7 billion tons of hematite ore and a further 2.5 billion tons of magnetite ore, the statement added.

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