Fortescue in China talks for Q4 iron ore pricing

PORT HEDLAND, Australia, Oct 19 (Reuters) - Australian iron ore miner Fortescue Metals Group (FMG.AX) is in talks over whether to continue its discounted pricing for Chinese steel mills into the December quarter, Fortescue said on Monday.

Fortescue agreed in August to sell its ore into China at a 3 percent discount to the Japanese benchmark price in return for up to $6 billion in Chinese funding. But the financing part of the deal collapsed, leaving the discount pricing in doubt.

"We are still in discussions over how to price the rest in the final quarter," Executive Director Graeme Rowley told Reuters en route to a media tour of the group's mines.

He said Fortescue had sold about 10 million tonnes of ore at the discounted price in the September quarter, but Fortescue was no longer obliged to continue this pricing arrangement.

Fortescue sells all its ore into China but is looking to extend sales into Japan and South Korea as it pursues a long-term expansion that would almost treble its annual output to 95 million tonnes from about 38 million tonnes currently.

The company may also consider blending its lumpy ore with the fine ores produced by Brazilian miners such as Vale SA (VALE5.SA) to achieve a more marketable blend which would offer steel-makers a more cost-effective product, Rowley said.

"There may be some options down the road about blending our ore with theirs," Rowley added.

(Reporting by James Regan, editing by Mark Bendeich)