The CEO of Fortescue Metals, Andrew Forrest, faces scrutiny in the Federal Court in Perth from today over his corporate conduct.
The court hearing started last week with preliminary legal argument about the case.
Now the substantive part of the hearing gets underway with opening statements from the Crown and then from the defense.
More than three years after the Australian Securities and Investments Commission ASIC) accused Mr Forrest and his company of misleading and deceptive conduct in relation to its disclosure over construction contracts with Chinese groups, the case will be heard before a judge.
Media reports say it is not certain whether Mr Forrest will testify at the hearing or exercise his right to silence as a privilege against any penalty.
In a statement to the ASX on Friday the company said:
"Fortescue’s position has not changed since this matter first arose and the company is fully prepared to defend the matter in Court."
The case has started amid reports that the company has put planned expansions “on hold” because of a claimed cash squeeze and the slump in demand for the iron ore.
Bloomberg says that in an interview, FMG Executive Director Graeme Rowley revealed the move to halt expansion.
The shares fell 4.2% Friday to $2.50.
Bloomberg reported that Mr Rowley also said the company, Australia’s third-biggest iron ore exporter, expects contract prices for the steelmaking raw material to drop about 30% in the year started April 1 after demand fell.
“We are expecting probably a reduction overall, looking at the spot market at the moment, of somewhere in the vicinity of say 30 percent,” Mr Rowley told Bloomberg Television on Friday
“The iron ore price will be set with China in the relatively near future.”
“It could very well be that the next benchmark is set between BHP and China,” Rowley said
“We’ve always said that we would be a price-taker and at this stage we are much happier with that position. That benchmark gets set and we will obviously honor those contracts in accordance with the price that is agreed.”
Meanwhile Arrow Energy has, as expected, moved to increase its coal seam gas exposure in Queensland after acquiring Beach Petroleum’s 40% stake in the Tipton West venture for up to $400 million.
The acquisition came a week after Arrow conceded defeat to Britain’s BG Group Plc in the fight for coal seam gas explorer Pure Energy Resources Ltd.
The Tipton West deal was strongly tipped by analysts after Arrow’s failure with Pure.
Arrow’s Australian chief executive Shaun Scott said "The reserves valuation implied by this transaction compares favourably with other recent transactions in the coal seam gas sector even before considering that it is a producing field, with infrastructure in place and exploration upside in the surrounding acreage," Mr Scott said in a statement.
Arrow Energy operates the Tipton West joint venture with a 42% stake, with Beach holding 40% and Shell holding the balance. With Beach gone, Arrow and its biggest shareholder, Shell, will control the areas.
The transaction will increase Arrow’s 1P (proven) reserves by 43 %, 2P (proven and probable) reserves by 40% and its 3P (proven, probable and possible) reserves by 30%.
The transaction initially will involve a payment of $260 million cash and the issue of $70 million in Arrow shares to Beach.
A further payment to Beach of $40 million will be required on the booking of additional 3P reserves, while a further $30 million is to be paid on certain milestones being achieved. That is mainly the gas produced from the area being used in an export LNG project.
Arrow said that "Based on current flow rates the Tipton West project is currently producing at the rate of 11.5 PJ per annum and is supplying gas to the Braemer 1 power station.
"The Agreement provides for the acceleration of most of the contingent payments under certain circumstances, and restrictions apply to the disposal of the Arrow shares being issued to Beach. It is anticipated that the transaction will close in May, 2009."
"The cash generated from what was a material, but non-core asset, leaves Beach in a strong net cash position," Beach managing director Reg Nelson said in a statement to the ASX.
Arrow has more than $700 million in cash reserves after realising a profit of about $200 million from the sale of its Pure Energy stake to BG Group.
Shares in Arrow gained rose 9 cents to $2.96 on Friday, but Beach shed 4 cents to 87 cents.
And the floundering Allco Equity Partners (AEP) is heading for eventual dismemberment.
The company is proposing a name change to remove the stigma of being associated with Allco and a small capital return will be made shortly to keep shareholders (including Allco founder, David Coe and his wife who control around 19%, happy).
The receivers of Allco will be happy, although Allco Equity Partners is appealing the decision by the courts to uphold the management agreement a subsidiary has for Allco Equity.
The receivers effectively control 37% of AEP and that’s worth more than $24 million to them. That will be enough to pay the receivers’ fees and charges for a while yet.
Allco Equity Partners says besides the cash return it will suspend new investment activity and put the future of the company to a vote in two years time.
Essentially the company is being put into
