China invests heavily in Australian miner-Fortescue

24 February 2009

China has increased its hunt for Australian strategic minerals by taking a 16.5-per cent stake for $770 million and may invest a further $3 billion in securities in Australia's Fortescue Metals Group.

Fortescue Metals Group said today that Chinese steel maker Hunan Valin Iron and Steel will pay $770 million (A$1.2 billion) for a 16.5-per-cent stake in the Australian iron ore miner.

Under a stand-still agreement, Valin will undertake to hold no more than 17.5 per cent of Fortescue and Valin will buy 225 million newly issued shares and buy 275 million Fortescue shares from US-based hedge fund Harbinger Capital.

"If the share subscription agreement gains the required regulatory approvals, Valin's equity in Fortescue will increase to more than 16 per cent of the expanded issue capital," Fortescue said in a statement.

Valin chairman Li Xiaowei said in a statement that Valin is "pleased to provide Fortescue with the capital necessary to underpin the development of Fortescue's impressive project pipeline, which will create new jobs and accelerate the growth of a world-class mining company."

Fortescue had appointed JPMorgan Chase & Co, Azure Capital Pty and Grant Samuel & Associates Pty as advisers to review the proposals it had received from various companies for buying some of its resources. (See: Fortescue hires JPMorgan, others to review Chinese proposals)