Federal Treasurer Wayne Swan has approved Anshan Iron and Steel Group Corporation's (Ansteel) $162 million acquisition of an additional stake in Gindalbie Metals.
The approval will allow AnSteel to increase its interest in Gindalbie, from 12.6 per cent to 36.28 per cent.
Gindalbie is Ansteel's joint venture partner in the $1.8 billion Karara project in the Mid West region and a greenfields joint venture in China.
Ansteel, China's second largest steel maker, said it will use the new deepwater port at Oakajee near Geraldton when it is developed to ship output from Karara to customers.
"My approval ... is conditional upon Ansteel supporting the wider development of infrastructure in the Mid West, and maintaining agreed levels of Australian participation in a greenfields joint venture in China's Liaoning Province," Mr Swan said in a statement.
"This involves the construction of a pellet plant (in China) to process iron ore product from Karara into pellets for use in steel mill furnaces."
Ansteel has pledged to support the development of the Oakajee port and rail project, which will give Mid West iron ore miners an export alternative to the congested port at Geraldton.
"Ansteel's proposed investment will ensure that production at the Karara project proceeds, which will underpin the development of the $3 billion Oakajee deepwater open access port north of Geraldton and the open access railway for this new iron ore province," Mr Swan said.
Another condition of Ansteel's approval is that it must not alter a 50:50 ownership structure for the proposed pellet plant without first seeking the prior approval of the Australian government.
"These undertakings support Australian mining jobs and protect Australia's investment participation in the Chinese resources market," Mr Swan said.
"The project will play a key role in developing the Mid West and in further strengthening Australia's important economic relationship with China."
Divestment orders apply if Ansteel breaches conditions of the approval, he said.
Gindalbie and Ansteel agreed to develop the Karara project in September 2007, and on April 23 this year complained about the tardiness of the WA government's approvals process.
But by April 29, the WA Environmental Protection Authority approved the project.
Shares in Gindalbie were up three cents, or 3.75 per cent, at 83 cents.