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FMG pays $US20m to settle ship dispute

FMG pays $US20m to settle ship dispute

Sydney: Iron ore miner Fortescue Metals Group has nearly resolved the year-long dispute with its shipping charter contractors after agreeing to pay more than $US20 million to one of the counterparties involved, wrotes WA Business news.

In early December 2008, Fortescue severed its long-term shipping contracts citing "changed market conditions" and "continued prudent business management" which immediately lead to legal action being taken against the Perth-based miner.

Fortescue announced today that it had reached a settlement agreement for its shipping dispute with SK Shipping Europe Plc pursuant to two suspended ship charter contracts.

Fortescue agreed to pay $US20.34 million ($32.2 million) to SK Shipping, equating to $US10.17m for each of the two disputed vessels.

Upon payment, the legal action initiated by SK Shipping will be withdrawn.

Additionally, Fortescue restructured its future cargo obligations with SK Shipping, whereby two new time charter vessels have been agreed with respective terms of 4 and 8 years, and an undisclosed freight rate under the restructured charter arrangements has been set at a base daily rate plus a hire incentive payment and includes a profit share arrangement.

The company said it has now successfully completed settlements with four counterparties and only has two remaining vessels to finalise.

In a stock exchange announcement this morning Fortescue said it will remain committed to the guidance given in February that the potential damages bill from its decision to cut the contracts was $US171 million.