(Agencies/China Daily)
Updated: 2008-02-01 10:25

Russian billionaire Alisher Usmanov has sold his 19.7 percent stake in Australian iron ore producer Mt Gibson Iron Ltd to a Chinese steelmaker, exiting an investment that has doubled since his purchase.

Usmanov's sale of about 157 million shares to Shougang Concord International Enterprises Co still needs regulatory approval, Perth-based Mt Gibson said yesterday in a statement, without giving the price. Hong Kong-listed Shougang Concord is controlled by Shougang Corp, China's ninth largest mill.

Chinese steelmakers, the largest consumer of iron ore, may double imports of the raw material in the next six years and are investing in Australian mining companies to secure supplies. Buying this stake may give Shougang indirect control of about 40 percent of Mt Gibson.

"It is all about securing long-term supply," said John Veldhuizen, an analyst at BBY. "Clearly with that position it is significant in size. Whether they go ahead and do a full corporate takeover, I would think it is unlikely."

Mt Gibson closed at A$2.62 on Jan 25, when it was halted for an announcement. Usmanov's stake would be worth A$414 million ($368 million) at today's value, after the shares doubled since he bought them in November 2006.

Shougang Corp, through Shougang Holding (Hong Kong) Ltd, also owns 18 percent of APAC Resources Ltd, which has a 20.2 percent stake in Mt Gibson, the mining company said in a statement.

Cheng Man Ching, a Hong Kong-based secretary of Shougang Concord, couldn't be reached immediately for comments.

"Mt Gibson advises that it has not been informed by Shougang Concord or Shougang Corp that it intends to make an offer to all of the Mt Gibson shareholders," the mining company said. "The board is making inquiries in relation to the transaction."

"Shougang is trying to reduce its reliance on external supplies of iron ore," said John Tang, a Hong Kong-based analyst at JPMorgan Chase &Co. Shougang may also seek cooperation on iron ore exploration, Tang said.

Shougang Concord bought a 73 percent stake in Asia Iron Holdings Ltd, which has an iron ore project in Western Australia, from Mt Gibson for A$52.5 million last year.

Mt Gibson, which last week reported first-half earnings of A$32 million, is seeking to expand production, and runs two mines in Western Australia. It is seeking to start shipping from a third mine, Extension Hill, in the first quarter of 2009.