FORTESCUE Metals Group did not mislead investors about binding agreements with Chinese parties because investors knew that its Pilbara iron ore project was in its infancy, a court has heard.
The Australian Securities and Investments Commission has alleged Fortescue engaged in misleading and deceptive conduct by overstating the nature of deals with three state-owned Chinese companies in 2004.

The deals turned out to be “framework” agreements requiring further negotiation, but a commercial outcome was never reached.

On the second day of a five-week hearing in Perth’s Federal Court, John Karkar, QC, for Fortescue, said the corporate watchdog had failed to take into account the context in which Fortescue made the statements.

Mr Karkar said it was common knowledge the framework deals would be supplemented with further agreements.

This was because media reports and analyst research - issued prior to the announcements in question - had described Fortescue’s project as being in the early stages with many milestones ahead.

Mr Karkar, citing several media reports, said the common investor would have taken the commentary into account.

“In short … the media thought the announcements were light on detail,” he said.

“We would submit the common investor with knowledge of the facts would understand that plans for the project were in their infancy and that Fortescue’s achievements had hitherto been preliminary.

“That is the context in which the announcement about binding … contracts were made.

“We say, in the end, having regard to what happened, investors were not misled.”

Mr Karkar said if necessary Fortescue could demonstrate the contracts to build and finance various parts of the project’s infrastructure were binding.

He said the seven per cent jump in Fortescue’s share price that followed the August 23, 2004 announcement were not “statistically significant”.