May 7, 2009 (China Knowledge) - Wuhan Iron and Steel (Group) Corp (Wisco), parent of Shanghai-listed Wuhan Iron and Steel Co Ltd<600005>, has signed an agreement with Australia-based Western Plains Resources Ltd (WPG) to set up an equally-held joint venture (JV) to develop WPG's Hawks Nest magnetite deposits in South Australia, the Shanghai Securities News reported on Wednesday.

Pursuant to the agreement, Wisco will spend A$25 million to conduct a bankable feasibility study (BFS) of the mine, which has a potential reserve of 1 billion tons.

If more money is needed for exploration and analysis or design and construction, Wisco will be required to invest A$20 million more to keep its 50% share in the JV, or its share in the JV will be diluted by up to 22%, depending on the level of additional investment.

According to the agreement, the Chinese firm will purchase 12.1 million new WPG shares priced at A$0.25 apiece for a total of A$3 million. After the transaction, Wisco will hold 15% of WPG and will be the second largest shareholder of the Australian company.