On April 22, Australian iron ore miner Fortescue Metals Group Ltd (Fortescue) announced that its share subscription agreement signed on February 25, 2009 with one of China's leading steel companies Hunan Valin Iron and Steel Group Company Ltd (Hunan Valin) received the approval of the Chinese government's National Development and Reform Commission (NDRC).
In a statement released by the company, Fortescue said, "The NDRC approval was the key milestone for the transaction and paves the way for the Chinese ministry of commerce and the state administration of foreign exchange to formalize the agreement."
Once this is done, all conditions under the agreement will have been satisfied to enable Hunan Valin to proceed with its acquisition of 260 million new Fortescue shares issued at a subscription price of AU$2.48 (US$1.48) per share to raise AU$644.8 million ($453.5 million) in new equity capital.
Approval from the NDRC followed the approval from the Australian Federal Treasurer which was announced on March 31, 2009.
The placement, combined with Hunan Valin's recent acquisition of 275 million existing shares from New York-based US hedge fund Harbinger Capital Partners, will take Hunan Valin's holding in Fortescue to 535 million shares, making it the second largest shareholder with 17.33 percent of total issued capital.
Fortescue and Hunan Valin previously announced on February 25, 2009 a cooperation agreement which will lead to increased iron ore sales to Hunan Valin and a commitment to research new technologies to process lower grade iron ores.