Bloomberg reported that Jiangsu Shagang Group Co has agreed to take a 45% stake in Grange Resources Ltd to help lock up future sales from a planned USD 1.6 billion iron ore project in Australia.

Perth based Grange in a statement said that Grange will combine with the Shagang controlled Australian Bulk Minerals, the operator of an iron ore mine in Tasmania in a transaction to create a company with a market value of AUD 1 billion.

Shagang's involvement will boost Grange's funding capacity and help speed development of the Southdown iron ore project in Western Australia as lending seizes up because of the global credit crisis. China's steelmakers, including Sinosteel Corp are investing in Australian producers of the raw material to gain supplies amid record prices.

Mr John Veldhuizen a resources analyst at BBY Ltd who rates Grange a buy said that “The long term outlook for iron ore is still pretty good, but there is a good chance that we have seen peak prices. The capital markets are very difficult at the moment. It puts Grange in a much better position to move this project forward.''

Grange said that under the transaction, Grange will issue 380 million new shares, worth AUD 718 million at yesterday's closing price to the holding companies that own Australian Bulk Minerals. Grange shareholders will own 26.1% of the new company and the owners of Australian Bulk Minerals, including Shagang, will control 73.9%.