hunan valin may invest a$3 billion in fmg

By Robert Fenner and Rebecca Keenan

Feb. 19 (Bloomberg) -- China’s Hunan Valin Iron & Steel Group may invest as much as A$3 billion ($1.9 billion) in Fortescue Metals Group Ltd., Australia’s third-biggest producer of iron ore, the Australian Financial Review reported.

Valin, a steelmaker backed by the China Investment Corp. sovereign wealth fund, may buy A$500 million ($320 million) of new stock in Fortescue as part of an investment that will help the Perth-based company double production capacity, the paper said without citing anyone. Fortescue doesn’t provide details of discussions it has had with various parties, spokesman Cameron Morse said today by phone from Perth.

China, the world’s biggest metal consumer, agreed this month to invest $21.2 billion in debt-laden mining companies Rio Tinto Group and OZ Minerals Ltd. Fortescue, which delayed expansion plans last year, yesterday said it held investment talks with China Investment and Anglo American Plc amid frozen credit markets and a slump in demand.

Fortescue gained 12 percent in Sydney trading yesterday after it said representatives from China Investment and Anglo American visited its operations “recently.” . It is the third- best performing stock on the Australian market this year.

OZ Minerals, the world’s second-biggest zinc producer, agreed to be taken over by China Minmetals Corp. this week, and Aluminum Corp. of China. agreed to buy stake in Rio Tinto Group’s biggest mines and raise its shareholding in the company.

The money from Valin will help build new port and rail facilities for Fortescue to more than double output to 120 million metric tons a year, the Financial Review reported.

Baosteel, China’s largest steelmaker, in May said it will invest in Fortescue should the Australian iron ore exporter fulfill its export potential.

The company produced 14.8 million metric tons of iron ore last year from its A$2.8 billion project in Western Australia, which began output last May.

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