SINOSTEEL Corp, China's second-biggest iron-ore trading company, won Australian government approval to buy as much as 49.9 percent of Murchison Metals Ltd.

The Chinese company had previously sought approval to acquire up to 100 percent of Perth-based Murchison, Australia's Treasurer Wayne Swan said yesterday. That application was withdrawn, he said, according to Bloomberg News.

A 49.9 percent stake in Murchison would be worth A$251 million (US$202 million) based on the stock's last traded price.

Sinosteel controls Midwest Corp, a neighboring iron ore producer to Murchison in Western Australia state's mid-west region. Murchison is seeking to develop a A$3.5 billion port, rail and mine project with Japan's Mitsubishi Corp at Oakajee in the state.

"Overseas investment develops assets," Andrew Forrest, chief executive officer of iron-ore miner Fortescue Metals Group Ltd, said in an interview broadcast on Sky Business News before the approval was issued. "I think you will continue to see growth in foreign investment in Australia because we are resource rich and capital poor."

Murchison climbed 11 percent to A$1.22 on the Australian Stock Exchange on Friday in Sydney.

The shares fell to the lowest in almost two years the previous day amid concerns that the cost of borrowing funds, needed to develop the project, will increase.

An initial study into developing the Oakajee project is scheduled to be completed by the middle of next year and, if approved, the port may open as early as 2012. Murchison and Mitsubishi won a tender to develop the port in July, beating a rival proposal from a China-backed venture.

"In approving Sinosteel's application, I have determined that a shareholding of up to 49.9 percent in Murchison will maintain diversity of ownership within the mid-west region," Swan said in an e-mailed statement.