CORRECTED - CORRECTED-UPDATE 1-Sinosteel boosts stake in target Midwest to 4

(Corrects per share value of Murchison offer in 3rd paragraph to A$6.61) (Adds details)

SYDNEY, June 6 (Reuters) - Chinese metals trader Sinosteel has increased its voting stake in Midwest Corp MIS.AX to 40 percent from one third, according to a regulatory filing on Friday, as it battles for control of the Australian iron ore prospector.

If Sinosteel gets more than 45 percent of Midwest it will be in a strong position to block a higher A$1.41 billion ($1.36 billion) takeover offer from Murchison Metals Ltd (MMX.AX), which needs a majority of Midwest shareholders' votes cast to secure approval.

Sinosteel has offered A$6.38 per share for Midwest against Murchison's all-share bid that equates to about A$6.61 per Midwest share based on Thursday's closing price. When Murchison first launched its reverse takeover plan in May, Midwest's board recommended the proposal but at the same time continued to recommend Sinosteel's offer while it assessed the market reaction to Murchison's offer.

The Midwest board is meeting on Friday and is expected to update the market on its view.

Murchison, with the support of Japan's Mitsubishi Corp (8058.T), says its aim is to build the merged company into the main producer in the Yilgarn region of Western Australia, which could be transformed into a major iron ore province by a planned new railway and port.

Sinosteel also expects the region to flourish and wants Midwest to lead its development, as the Chinese company seeks stable supplies of raw materials to feed surging demand.

Murchison is being backed by its main shareholder, U.S. hedge fund Harbinger Capital, which also owns a stake in Midwest. ($1=$1.04) (Reporting by Sonali Paul and Jonathan Standing)