UPDATE 1-China group to up stake in Australia miner Apollo
(Adds details, updates shares)
By James Regan
SYDNEY, April 29 (Reuters) - Chinese Iron and Steel Group (CISG) plans to lift its stake in outback prospector Apollo Minerals Ltd (AON.AX) to 19.9 percent, Apollo said on Tuesday, the latest Chinese move into Australia's mining sector.
Apollo shares rose as much as 20 percent after the announcement of the plan by CISG through its Hugo Natural Enterprises Ltd vehicle, which would take the Chinese group's stake to just short of the 20 percent threshold requiring a full takeover offer under Australian law.
Apollo was up 13 percent to A$0.30 in afternoon trading, easing back from a peak of A$0.32.
The transaction would give Apollo, which is exploring for ore in two Australian states and capitalised at around A$13 million ($12 million), A$10 million in cash to develop mines, it said.
China's hunger for iron ore has led it into the embrace of Australian projects.
"China needs the ore and Australia's got it, so it's logical they'd be looking to take part in developing new mines," said Eagle Mining Research analyst Keith Goode.
Earlier on Tuesday, trading in prospector Midwest Corp MIS.AX was halted pending an announcement the company said may impact on a proposed takeover by China's Sinosteel Corp.
HOSTILE BID
Sinosteel is offering A$954 million for the Midwest shares it does not own in the first hostile bid by a Chinese firm in Australia's mining sector. Another miner, Murchison Metals Ltd. (MMX.AX> said on Tuesday that Sinosteel had taken a 2.4 percent stake in the company.
Also on Tuesday state-owned Metallurgical Group Corp was ready to finalise a A$400 million acquisition of a mining project from Cape Lambert Iron Plc (CFE.AX) CLIO.L, the Australian firm said.
The Chinese firm is awaiting approval from Australia's Foreign Investment Review Board before it proceeds with the deal.
China anticipates its construction boom will last decades and require massive volumes of steel, prompting it to take a long view of metals prices and to spend sooner rather than later on securing steady supplies.
With mining heavyweights such as BHP Billiton Ltd (BHP.AX) (BLT.L) and Rio Tinto Ltd (RIO.AX) (RIO.L) vying for supremacy, and rival bidders choked by a credit crisis, some see this as China's best chance to buy assets.
Bankers say Chinese firms could do half a dozen deals in iron ore, coal and energy within months.
Australia has generally allowed smaller mining firms to fall into foreign hands, but has been protective of its corporate giants, blocking a takeover of oil company Woodside Petroleum Ltd (WPL.AX) by Royal Dutch Shell (RDSa.L) in 2000, citing national interests.
China's state-owned aluminium major Aluminum Corp of China teamed up with Alcoa Inc (AA.N) to buy a $14 billion stake in Rio Tinto earlier this year, but it bought only London-listed shares, since buying the Sydney shares would need government clearance.
Potential targets for China include Fortescue Metals Group (FMG.AX), which has a joint venture with China's Baosteel, and Mount Gibson Iron (MGX.AX) in play after another Chinese firm was asked by regulators to release a 19.5 percent stake.
China's No.5 steelmaker, Anshan Iron & Steel Group, already has a pact with Gindalbie Metals Ltd (GBG.AX).
Apollo is exploring over the Mt Oscar iron ore deposit in Western Australia's Pilbara region. It also owns the Commonwealth Hill Project in South Australia, which contains three prospective zones for iron ore.
CISG has said it hopes to get the right to market iron ore eventually mined from the Mount Oscar deposit.
The Chinese group paid a premium for its previous stakes in Apollo via share placements but was believed to be acquiring its latest shares on market, an Apollo spokesman said. (Reporting by James Regan)
