Fortescue settles Classic capesize dispute

In a statement to the Australian Securities Exchange, Fortescue said key terms of the deal included an “upfront” US$25m payment to Monaco-based Classic, which is backed by shipowner George Economou, as well as an additional payment of US$0.99 per tonne over about 22m tonnes it is due to ship with Classic over the next two-and-a-half years.

At the same time, Fortescue and Classic will extend their shipping relationship under the settlement by expanding the contracted term from a previous five years to 11 years, now ending in 2020.

According to the mining group, its shipment obligations with Classic will grow progressively over the full period from four shipments monthly in 2010 rising to double that over the last three years up to 2020.

While the current daily fixed charter rate is US$45,000, the deal includes moving to a variable rate linked to the index for Australia-China voyages which Fortescue says has an estimated net present value of US$66.7m on future  payments.

Based on the fact it turned on three “suspended” five-year contracts, Fortescue claimed the Classic dispute was the next largest in a raft of disputes with international shipping companies after a dispute with Bocimar that has already been settled.

Following its out-of-court deal with Classic, Fortescue has another five suspended shipping contract disputes with at least three separate companies which it said it is “vigorously” defending.

The next UK hearing in the actions was said to be scheduled for September 2009.

It said the settlement was “consistent” with market guidance it had previously issued that its potential exposure to the disputes was an estimated US$171m.

For Classic, the agreement comes immediately after an encouraging UK court order in another contract of affreightment dispute it has been pursuing.

Last week, a UK High Court judge backed Classic’s claims against Malaysian cargo interests by ordering the defendants to pay into court about US$18.5m in anticipation that they were unlikely to successfully defend the action.

The battle concerned contracts for 45 capesize cargoes of Brazilian ore worth an estimated US$300m over the next six years for Limbungan Makmur and its Malaysian quoted parent group Lion.

www.lloydslist.com

Have you renewed your subscription? Did you know that, from next week, this story will only be accessible to subscribers?

To ensure a smooth transition, readers have enjoyed full access to all of Lloyd's List DCN's online coverage since the new-look website was launched on May 6. From Monday, only a select number of Lloyd's List DCN's online stories will continue to be accessible to non-subscribers. Subscribe today to continue to receive full access beyond June 1. If you are a subscriber and you have not received your username and password in the past week, please contact our subscriptions team at subscriptions@informa.com.au or (02) 90804451.