China group to up stake in Australia miner Apollo

SYDNEY, April 29 (Reuters) - Chinese Iron and Steel Group (CISG) plans to lift its stake in Australian prospector Apollo Minerals Ltd (AON.AX) to 19.9 percent, Apollo said on Tuesday, the latest Chinese move into Australia's resource sector.

Apollo shares rose 20 percent after the announcement of the plan by CISG through its Hugo Natural Enterprises Ltd vehicle, which would take the Chinese entity's stake to just short of the 20 percent threshhold requiring a full takeover offer under Australian law.

The transaction would give Apollo, which is exploring for ore in two Australian states and is capitalised at around A$13 million ($12 million), around A$10 million in cash to develop mines, it said.

Apollo shares rose as much as 20.75 percent to A$0.32, and stodd 17 percent higher at A$0.31 at 0228 GMT.

China's hunger for iron ore has led it into the embrace of Australian projects.

Earlier on Tuesday, trading in the shares of prospector Midwest Corp MIS.AX was halted pending an announcement that the company said may impact on a proposed takeover by China's Sinosteel Corp.

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.

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 giants 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 and wary of sky-high prices, 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.

Potential significant targets 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), while state-owned Metallurgical Group Corp is buying a A$400 million project from Cape Lambert Iron Plc (CFE.AX) CLIO.L.

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 desposit. (Reporting by James Regan)