Australian-based iron ore company Fortescue Metals Group and Brazilian mining giant Vale have signed a memorandum of understanding (MoU) to create a joint venture and combine selected volumes of iron ore from both companies.
The companies will also pursue long-term opportunities to create value for customers in the Chinese steel industry.
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Fortescue said that the new product will be developed to fit the long-term needs of its customers.
Under the agreement, Vale will also invest in Fortescue through a minority acquisition of shares on market and / or investment in existing or future mining assets.
The MoU is subject to agreement on the final terms of any resulting transaction documents and any other required approvals.
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Fortescue Metals Group CEO Nev Power said: "The memorandum of understanding will allow us to work together to deliver long-term value to our customers, through the efficient supply of an attractive and competitive new iron ore blend in China."
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By GlobalDataThe latest announcement comes after the prices of iron ore increased 19% overnight to $63.74 per tonne.
Bloomberg quoted China Merchants Futures in Shenzhen analyst Zhao Chaoyue saying: "The iron ore and steel markets have gone berserk, they’ve departed from fundamentals and are heavily driven by sentiment."
Vale is a logistics operator in Brazil and produces iron ore, while Fortescue exports 165 million tonnes of iron ore per annum.
