Close to US$900 million worth of assets held by Russian steelmaker Magnitogorsk Iron & Steel Works (MAGN.RS) have been frozen by an Australian court in a dispute with miner Eurasian Natural Resources Corp. PLC (ENRC.LN), Magnitogorsk's takeover target Flinders Mines Ltd. (FMS.AU) said Thursday.

A court order released by Magnitogorsk's takeover target, Flinders Mines Ltd. (FMS.AU), shows that Australia's Federal Court in Sydney on Nov. 25 froze 857.6 million Australian dollars (US$877.1 million) of Magnitogorsk's assets in Australia, including shares in Fortescue Metals Group Ltd. (FMG.AU), the world's fourth-largest iron ore miner. The case was brought by the marketing division of ENRC, a diversified miner focused on Kazakhstan and listed in London.

"We were made aware that this (holding) was being frozen," a Fortescue spokesperson said, adding she didn't have further details of the order.

If bought before the roughly 20% fall in Fortescue's share price in late September and held at book value, the holding would be consistent with a value just below the 5% reportable limit on Australian shareholdings.

Magnitogorsk held 5.37% of Fortescue stock as recently as March 2009 and still has a minority shareholding. Flinders said the order wouldn't affect Magnitogorsk's A$554 million offer for the company, also announced Nov. 25, and said its board continued to recommend the takeover.

"Magnitogorsk has informed Flinders it is of the view that the freezing order currently in place does not and will not impact on Magnitogorsk's ability to complete the scheme," the company said.

ENRC and Magnitogorsk are currently in dispute over a shortfall in the steelmaker's buying of ENRC's iron concentrates and pellets, although the court papers do not suggest a link between the asset freeze and that dispute.

Magnitogorsk is contracted to buy around 12 million metric tons of ENRC's 17 million tons annual iron ore output, but the miner said in a quarterly report Nov. 10 that the steelmaker would only take 70% of this amount during the last four months of 2011.

"We expect to be compensated by MMK via an arbitration process for any negative economic effect as a result of the breach of contract. We reserve our legal rights in this regard," ENRC said in the report.

Magnitogorsk has US$915 million in unused credit facilities on June 30. Paying for the Flinders acquisition from these facilities would still leave the steelmaker well within its existing financing covenants, based on the most recent published financial information.

A lawyer for ENRC said he could not comment on the matter and a lawyer for Magnitogorsk was not immediately available for comment.

-By David Fickling, Dow Jones Newswires; +61 2 8272 4689; david.fickling@dowjones.com

--Cynthia Koons in Sydney contributed to this article

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