A share subscription agreement between Fortescue Metals Group and Hunan Valin Iron and Steel Group Company has received approval from the Chinese Government’s National Development and Reform Commission (NDRC).

The 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 formalized, all agreement conditions will have been satisfied enabling Valin to proceed with acquisition of 260 million new Fortescue shares issued at Aus$2.48 per share to raise Aus$644.8 million in new equity capital. NDRC approval follows Australian Government approval on March 31.

The placement, combined with Valin’s recent acquisition of 275 million existing shares from Harbinger Capital Partners, will take Valin’s holding in Fortescue to 535 million shares, making it the second largest shareholder at 17.33% of total issued capital.

The two companies had previously signed a cooperation agreement which will lead to increased iron ore sales to Valin and a commitment to research new technologies to process lower grade iron ores.

Fortescue shipped its first load of iron ore in May 2008, and is already Australia ’s third largest iron ore producer. That production is backed by more than 4.5 billion tonnes of iron resources, including 1.6 billion tonnes of reserves, already delineated from less than 10% of its 73,000sqkm of tenements in the Pilbara region of Western Australia .

Fortescue has off-take commitments for its entire initial production target of 55 million tonnes of iron ore/year and has accumulated commitments for additional expansion tonnages of some 100 million tonnes/year.

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