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Fortescue Metals axes long-term shipping contracts

Fortescue Metals axes long-term shipping contracts

Sydney: Fortescue Metals is suspending all its long term ore shipments to switch to contracts that require the buyer to freight the product.

The Pilbara-based miner said the change in contracts was because of "unforeseen circumstances".

Shares in Fortescue dropped 11.4 per cent in the first 15 minutes of trading this morning, to $2.18 in an Australian market down 1.2 per cent.

Fortescue's stock had surged as much as 42 per cent earlier in the week on speculation of a takeover play by BHP or a deal with Chinese investors.

In a statement to the Australian Securities Exchange, the iron ore miner said the changed arrangements as a result of the suspensions should not affect its marketing program in regards to volumes of product shipped.

Fortescue said the only change would be the split between CFR, or cost including freight, and FOB, free on board, contracts.

To date, about two thirds of Fortescue's sales had been on CFR terms, but it plans to reduce that to about one third. [5/12/08]