UPDATE 1-Three Chinese groups eye Fortescue iron ore stake

(Recasts, adds Fortescue, analyst comment)

By James Regan

SYDNEY, May 12 (Reuters) - Chinese state-owned steel firms may be looking for a stake in Australian iron ore miner Fortescue Metals Group Ltd (FMG.AX: Quote, Profile, Research, Stock Buzz), in the latest in a growing number of overtures by Beijing to wield more control over much-needed raw materials supplies.

The Australian newspaper said on Monday that Sinosteel, Chinalco and Baosteel (600019.SS: Quote, Profile, Research, Stock Buzz) are looking at the 16 percent stake in Fortescue that U.S. boutique fund Harbinger Capital Partners was considering selling.

"We're not denying it," Fortescue spokesman Paul Downie said. "We're not sure if Harbinger is a seller or not."

Harbinger could not be immediately reached for comment.

Fortescue shares were up 1.4 percent at A$9.31 by 0306 GMT, in a broader market up 0.6 percent.

Any sale to a Chinese group is likely to require permission from the Australian government, which has raised concerns about foreign interest in the mining sector.

Australia's treasurer, Wayne Swan, has said foreign investment was welcome in Australian mining, though government-owned entities in China and other countries will be carefully scrutinised before any big investments can proceed.