China's Centrex investment gets govt nod

The Australian government has approved a $271 million investment by China's third largest steel maker in iron ore explorer Centrex Metals Ltd.

The company plans to build a new export port in South Australia with its proposed Chinese joint venture partner.

The Foreign Investment Review Board (FIRB) has unconditionally given the green light to Wuhan Iron & Steel (Group) Co (WISCO) earning a 60 per cent stake in the iron ore rights to five Centrex-owned tenements on South Australia's Eyre Peninsula.

Centrex said WISCO was now gaining approval for the deal from China's State Department of Commerce.

To earn its interest in the iron ore rights, WISCO will pay about $10.1 million to take a 15 per cent stake in Centrex via a placement of 40 million new shares at a heavily discounted price of 25 cents per share.

Shares in Centrex closed seven cents, or 10.94 per cent, higher at 71 cents on Thursday.

WISCO's stake in Centrex reduces to 13.04 per cent post-issue, so the placement does not require shareholder approval as it falls under the 15 per cent threshold applying to foreign acquisitions.

Centrex chairman David Lindh said in a statement on Thursday that the company's board would be expanded to accommodate WISCO nominee Liaowu Guo.

WISCO also will pay Centrex up to $186 million in staged payments if the iron ore explorer achieves progressive resource delineation targets.

WISCO will further provide $75 million to Eyre Iron Pty Ltd, the 40/60 joint venture between the parties that will undertake exploration and study programs.

Centrex and WISCO will form another joint venture, this time on a 50/50 basis, to build a deepwater export port on Centrex's wholly owned gulf-front land at Sheep Hill, north of Tumby Bay in South Australia.

WISCO is responsible for arranging project finance.

Mr Lindh said Centrex aimed to be a major player in Australia's iron ore industry.

"All of the cornerstones are now in place to rapidly escalate our iron ore growth on the Eyre Peninsula into a billion dollar business, with further and considerable multi-project development opportunities," he said.