Forrest defends ‘logic’ of ducking royalties

Mining billionaire Andrew Forrest has defended attempts by his company, Fortescue Metals Group, to defer more than $200 million in royalty payments to the Western Australian Government, saying the failed attempt was based on “sound logic”.

In comments that amount to the first time Fortescue has admitted seeking to avoid the payment, Mr Forrest said the deferral was designed to ensure the restart of expansion works at the Kings iron ore project went ahead.

Work on Kings was halted in September when Fortescue lurched into a short-term debt crisis caused when iron ore prices dipped below $US90 per tonne.

Mr Forrest said the WA government would enjoy much bigger, longer term economic benefits from the Kings project going ahead, than from a single royalty payment, and the deferral was designed to ensure the expansion could continue if iron ore prices stayed around $US90 per tonne.

But Mr Forrest said the request became redundant when the iron ore price recovered to $US120 per tonne, where it still rests today.

“We put that logic to the WA Government,” he told ABC Radio.

“They can see the logic absolutely, but with the iron ore price going from $US90 per tonne to $US120 per tonne they said ‘guys you can bring on Kings whenever you like’.” Mr Forrest said the iron ore price would continue to fluctuate but was likely to remain close to $US120 a tonne in the short term at least.

Mr Forrest is now chairman of Fortescue, after spending close to a decade as the company’s chief executive.

Fortescue surprised the market on Thursday when it was revealed to be negotiating an 18 per cent stake in a shale gas exploration company.

Fortescue said the deal, if signed, was designed to help find energy sources to supply its iron ore business.

The original release of this article first appeared on the website of Hangzhou Night Net.

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