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First Fortescue iron ore to China amid stake talk

Reuters - Thursday, May 15

SYDNEY, May 15 - Fortescue Metals Group Ltd said on Thursday it had shipped its first iron ore with a consignment to the booming China market, amid reports it may be the latest Australian miner in the sights of Chinese investors.

Fortescue said the 180,000-tonne shipment went to Baoshan Iron and Steel Co , China's biggest steelmaker, which according to media reports is one of several Chinese firms seeking a stake in Fortescue in a bid to lock in steady raw materials supplies.

Fortescue founder Andrew Forrest said he would welcome any Chinese firm as an investor.

"Fortescue was Australian born and bred and I think it will always be an Australian-owned company, and the Chinese are most welcome to participate," Forrest told a media teleconference.

"I'm not here to say they have a particular interest in buying shares but they are most welcome to."

Chinese steel mills' insatiable appetite for iron ore to feed a growing steel industry has helped push prices higher for six straight years, delivering huge profits to Australian miners, including BHP Billiton Ltd and its rival and takeover target Rio Tinto Ltd .

It has also triggered a rush by Chinese companies to invest in Australian miners.

Chinese aluminium maker Chinalco in February paid $14 billion for 9.3 percent of Rio Tinto and this week was rumoured to be in the market for 10 percent of BHP Billiton [ID:SYD53306].

Baosteel was in a "slow waltz" to take a stake in Fortescue, China's Caijing magazine reported on Wednesday. [ID:PEK299891]

The Australian newspaper reported earlier this week that three Chinese companies, including Baosteel, were looking at taking stakes in Fortescue.

Fortescue, whose stock has more than tripled in the past year as iron ore prices have soared ahead of its initial shipment, was in the process of completing full commissioning of its mine, which will see annual output of 55 million tonnes of ore at full speed, Forrest said.

He said he hopes to see annual output rise to more than 100 million tonnes eventually as more deposits around its mine are exploited.

All of its output will go to China. Fortescue shares closed 1.2 percent lower at A$9.24 on Thursday after earlier gaining as much as 4 percent.

Some of the proceeds from the first load of ore, which will arrive in China on May 27, will be donated to the victims of the earthquake in China's Sichuan Province, according to Forrest.

Fortescue remains locked in legal battles with Rio and BHP over access to their railways and ports in the Pilbara region in western Australia, which both companies rely on to ship ore and refuse to share.

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