Miner Andrew Forrest makes another $400m in one morning: Economy roundup

The founder of Fortescue Metals Group, Andrew Forrest, has enjoyed another profitable morning with the company’s share price soaring 21% on speculation that it may be the subject of a bid from a Chinese firm. Forrest’s stake in the company has jumped from $3.9 million to $4.2 billion as a result. Last week he made $500 million in one morning after speculators pushed the stock up almost 20%.

The collapse of Chinalco’s deal with Rio Tinto has some investors betting that the Chinese company could cast its eye over Fortescue for a possible investment.

The Australian share market has opened 0.2% higher today, ahead of the release of Australian Bureau of Statistics data which showed unemployment rose to 5.7%.

The benchmark S&P/ASX200 index was up 20 points or 0.5% to 4044.4 at 12.20pm AEST. The Australian dollar also remained steady at US80 cents.

Commonwealth Bank shares dropped 1.5% to $37.39, while Westpac lost 0.4% to $19.71. AMP fell 0.4% to $4.99 as NAB gained 0.7% to $22.28.

Chinese company Minmetals has increased its bid for the majority of assets in Australian mining giant OZ Minerals by 15% just before a shareholder vote on the new deal.

Minmetals said yesterday that it has increased its offer from $US1.2 billion to $US1.386 billion, while OZ Minerals shares have been placed in a trading halt. If it rejects the proposal, the company may be forced into administration due to its $1.2 billion debt.

OZ Minerals chairman Barry Cusack told shareholders at the company’s annual general meeting the deal will help the company pay off its debt.

“The board believes that the cash proceeds from the Minmetals transaction, relative to the recapitalisation proposal in aggregate represent a value in excess of the upper end of the independent expert’s range,” Cusack said.

Overseas, the Reserve Bank of New Zealand has kept its interest rates unchanged at 2.0%, but says it has left room for further cuts as it assesses economic conditions.

The bank has dropped interest rates from a high 8.25% during July last year to help shield the economy against the financial crisis, and will keep rates at current or lower levels until next year.

In the US, Wall Street dropped on investors’ fears that rising interest rates could delay an economic recovery. The Dow Jones Industrial Average dropped 24.04 points or 0.27% to 8739.02. Oil prices also increased to $US72 for the first time in seven months.

But good news came from the Federal Reserve, where a new report suggests that while economic conditions worsened through May some areas are seeing moderating contraction rates.

The Beige Book of economic reports from 12 US districts showed that while the labour and housing markets remain weak, some areas are showing “signs that job losses may be moderating”.

Eight of the bank’s districts say they recorded larger numbers of home sales due to low interest rates and falling prices.