By staff reporters Yan Jiangyin and Zhang Boling

From Caijing online

Wuhan Iron and Steel Group (WISCO), China’s third largest steel producer, plans to invest up to AU$ 180 million (125 million yuan) in an iron ore project owned by Centrex Metals Ltd (ASX: CMX) in southern Australia.

The purchase will give WISCO half of the shares in the project, located in the Eyre Peninsula, giving WISCO the option to purchase a maximum of one billion tones of iron ore at AUD 0.18 per ton, Centrex announced on Thursday.

“It is a good time now to buy foreign mineral resources. This not only lowers transaction costs, it also alleviates future cost pressures making it easier to control raw material costs,” Bai Fang, a spokesman for WISCO, told Caijing in a phone interview.

WISCO also bought 15 percent of Centrex’s shares at AU$ 0.25 per share.

The deal needs Chinese and Australian government approval. The final agreement is expected to be signed on March 17 2009, Centrex said.

Centrex’s CEO David Lindh said in the statement that working with WISCO is a “milestone event.” WISCO currently participates in five Centrex projects on the peninsula’s south side. WISCO has also agreed to build a deep-water harbor with Centrex for product export.

Centrex Metals, based in Adelaide, was established in March 2001. The company holds exploration permits to more than 2,000 square kilometers in the Eyre Peninsula, which mostly holds hematite and magnetite reserves.

Centrex’s shares closed at AUD0.25 on Friday, at WISCO’s purchasing price.

(AU$1 = $0.69)