Australian iron ore mining company Fortescue Metals Group announced on Monday it had agreed to a reduction in the price of iron ore delivered to Chinese steel makers effective until the end of December 2009.

The agreement with Baosteel Group Corporation and China Iron and Steel Association (CISA) commits them to acquire about 20 million wet metric tonnes from Fortescue between July 1 and Dec. 31 2009.

"The agreed price is 0.94 U.S. dollars per dry metric tonne unit (dmtu) for Fortescue's Rocket Fines and is about three percent under the price agreed by other Australian producers with non-Chinese Steel mills," Fortescue said in a statement.

"This price equates to approximately 55.5 U.S. dollars per dry tonne for Fortescue grade iron ore. Fortescue has also agreed a lump price of 1.00 U.S. dollars/dmtu for high grade lump which is equivalent to approximately 61 U.S. dollars per dry tonne."

A condition subsequent to the agreement was the completion of finance by Sept. 30 2009, by Chinese financiers on terms acceptable to Fortescue.

This is estimated by Fortescue to be an amount of 5.5 billion to 6 billion U.S. dollars.