A Chinese steel company has confirmed its intention to buy at least a $2.2 billion stake in burgeoning miner Fortescue Metals Group.
Sinosteel, the steel trading giant, told the Australian Financial Review it was in discussions with US hedge fund Harbinger Capital Partners about acquiring half of its 16% stake in Australian miner.
Sinosteel Australia deputy general manager William Ren said the company would prefer to buy Harbinger's entire $4.4 billion stake but the fund would sell only half, the paper said.
Fortescue shares rose as much as 0.84%, or 8 cents, to $9.64 in early trade after closing down 1.4% to $9.56 on Friday.
Chinese steelmakers have been anxious to acquire stakes in Australian resources companies in order to secure the materials needed to sustain the nation's rapid industrialisation and growth.
In January Chinese aluminium company Chinalco partnered with Alcoa to take a 12% stake in Rio Tinto worth about $15 billion. Rumours persist the Chinese will make a play for a stake in Rio's larger rival BHP Billiton as well.
Fortescue, which has contracts to supply ore with ten major Chinese steelmakers, has been viewed as a potential acquisition target by the Chinese since the company's founding three years ago.
The Perth company loaded its first shipment of iron ore on schedule in West Australia two weeks ago, making good on a deadline promised by chief Andrew Forrest. Fortescue, which has extensive reserves in the Pilbara, is the third-largest Australian supplier of ore to China.
Sinosteel had made a previous play for Fortescue in 2007, but the deal fell apart over price issues, according the AFR, but Fortescue's success in making its first shipment has triggered Sinosteel to take another look at the mining company.
Fellow Chinese miners Chinalco and Baosteel have also reportedly been linked to discussion with Harbringer over a stake in Fortescue.
FDL Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
