06-062 ASIC commences proceedings against Fortescue Metals Group and Andrew Forrest
Thursday 2 March 2006
The Chairman of ASIC, Mr Jeffrey Lucy today announced that ASIC has issued proceedings in the Federal Court in Perth seeking civil penalty orders against listed company Fortescue Metals Group Ltd (Fortescue) and its Chief Executive Officer, Mr Andrew Forrest (Forrest).
Fortescue is a listed company that is developing a project to mine iron ore in the Chichester Ranges in the Pilbara region of Western Australia and exporting it from Port Hedland.
ASIC is alleging that Fortescue engaged in misleading and deceptive conduct and failed to comply with its continuous disclosure obligations when it announced various contracts with Chinese entities on 23 August 2004 and 5 November 2004.
In the first announcement on 23 August 2004, Fortescue claimed it had a binding contract with China Railway Engineering Corporation to build and finance a railway from its tenements to the export hub at Port Hedland.
In the second announcement on 5 November 2004, Fortescue claimed to have further binding contracts with:
- China Harbour Engineering Corporation to design, build and finance a shiploading and stockyard facility at Port Hedland; and
- China Metallurgical Construction (Group) Corporation to design, build and finance a mine process plant.
This announcement stated that Fortescue had established a broad platform for the delivery of the three major component parts of its AUD1.85 billion Pilbara Iron Ore and Infrastructure Project.
ASIC is alleging that Fortescue, when making these announcements, failed to disclose important information regarding the nature of these documents.
In particular, Fortescue did not disclose that the parties had not reached a concluded agreement on fundamental aspects of the projects and they had merely agreed that they would in the future jointly develop and agree on such matters. Following media speculation and queries from the Australian Stock Exchange (ASX), Fortescue disclosed the documents, comprising of 3, 4 and 5 pages respectively, on 29 March 2005 and 31 March 2005.
ASIC is seeking civil penalties of up to $3 million against Fortescue.
In relation to Mr Forrest, ASIC alleges that he was knowingly concerned in the contraventions by Fortescue and also, that he breached his duty as a director to exercise care and diligence by failing to ensure that Fortescue complied with its obligations.
ASIC is seeking penalties of up to $600,000 against Mr Forrest and an order that he compensate Fortescue for any pecuniary penalty it is required to pay.
ASIC’s investigation commenced in May 2005 following a referral from the ASX.
The matter is currently scheduled for a directions hearing on 28 March 2006.
Note for media
ASIC has lodged a statement of claim with the Federal Court. Requests for copies of this claim should be made directly to the Court Registrar.
ASIC Website: Printed 02/10/2010
