FMG sells extra shares to Hunan Valin

Chinese steel maker Hunan Valin Iron and Steel Group Company is set to increase its stake to 17.4 per cent in Fortescue Metals Group by subscribing for a further $87 million in shares.

Valin will pay $2.48 per share, as per the previous share subscription agreement, and increase its stake in Fortescue from around 16 per cent previously.

Valin's total investment in Fortescue, including the new 35 million share acquisition, will total $644.8 million.

FMG spokesperson Paul Downie told WA Business News that following FMG's decision to shelve its $500 million capital raising, Valin asked if it could subscribe for further shares.

Valin's interest in FMG has been capped at 17.55 per cent, as previously agreed to by both companies.

Valin has made an application to the Foreign Investment Review Board to take up to a 20 per cent interest in FMG. The application has yet to be approved.

FMG said the funds would be used to strengthen the company's balance sheet and provide a "strong financial base" for the group to expand its production capacity above 55 million tonnes a year.

The company operates the Cloudbreak iron ore mine in the Pilbara region of Western Australia, about 260 kilometres south-east of Port Hedland.

Fortescue shares gained four cents to close at $2.54.