China's largest steelmaker Baosteel has made a strategic investment of a 15-per cent stake in Australian iron ore and coal miner Aquila Resources for $240 million to secure supplies of iron ore, coking coal and manganese.

Baosteel said yesterday that it would invest as much as $240 million in Aquila via a placement of up to 43.95 million shares at A$6.50 a share to acquire the 15 per cent stake.

It wil also appoint its vice president, Dai Zhihao, to the Aquila board.

''This is a transforming event for Aquila. China's largest steelmaker has established a strategic co-operation with Aquila, not only to make a major investment in the company, but also to advance participation in some of the important projects in the company's portfolio,'' Aquila said in a statement yesterday.

''For Baosteel, this represents its first major international strategic investment in a public company and it is an important transaction in Baosteel's strategy to secure long-term supply of critical steel raw materials for its steelmaking business,'' the statement added.

The deal with Baosteel will help the Perth-based Aquila to fast track the development of its key iron ore, coal and manganese projects.

Baosteel will work with Aquila to assist in sourcing low-cost financing from Chinese institutions for a number of the company's projects, including the strategic West Pilbara Iron Ore Project. The support of Baosteel in accessing the Chinese financial institutions will be of significant importance, value and advantage to Aquila.

Under the agreement, Aquila and Baosteel will work towards establishing a joint sales arrangement to assist in the distribution of the company's, and potentially Baosteel's share of production, from these key projects throughout China.

Under development projects of Aquila are in iron ore, steelmaking coal and manganese prospects in Australia and South Africa. Aquila's Eagle Downs coking coal project will require an investment of A$977 million to build and the mine could start production in 2012.

Aquila is a mining company focussing on iron ore and coal in Australia and overseas. It produces coal from its Isaac Plains Project in the Bowen Basin, in central Queensland and projects include iron ore mining in West Pilbara in WA and Thabazimbi, in South Africa.

It also has three coal projects at Isaac Plains, Eagle Downs and Washpool, in Queensland, and the Avontuur manganese project in South Africa.

Aquila said the Baosteel deal would underwrite the delivery of key projects in iron ore, metallurgical coal and manganese.

According to analysts, China is taking small stakes in small and medium size miners globally so as to reduce the dependency for iron ore from the big three miners-Vale of Brazil and Anglo Australian miners Rio Tinto and BHP Billiton.