street talk, page-4

From the AFR article
"In what may not bode well for those looking to pay $US3 billion or more for a minority stake in Fortescue’s infrastructure on hopes of more third parties using it, the economics did not stack up.

IOH will now go back to a list of parties it had met to discuss deals last year before the Fortescue deal was reached, having gained $21 million in the process".

This may make sense to the writer of the article, but it is totally illogical. Yes, a deal with FMG did not stack up for IOH and FMG didn't want the project - that part makes sense. BUT, for IOH to terminate early and forgo 4 million so that they can just talk to other potential partners seems crap (financial speak for totally illogical).

And then there remains the cost to IOH of the 4 million dollars. Was it important to give FMG this money to preserve a relationship that has so far given IOH nothing and doesn't promise to give them anything in the foreseeable future? (Ok, so there is some vague talk about Maitland). What about the $25 mill that FMG had already paid? No, that was the price that FMG paid for the 13 month option on Iron Valley and they changed their mind - end of story.

It is my recollection that it is FMG who has much to gain by preserving the relationship with IOH. I believe that they will save themselves about 70 mill by accessing their ore through the Iron Valley land.

I believe that there is more to this story. When we look at the chart for IOH it has been in an uptrend for a while. I accept that so has the iron ore price, but as SW says he would have expected a small retreat at this time.