Sydney - Fortescue Metals Group Ltd said Tuesday that Chinese steel maker Hunan Valin Iron and Steel will pay 558 million Australian dollars (357 million US dollars) for a 16.5-per-cent stake in the Australian iron ore miner.

Under what's known as a stand-still agreement, Valin will undertake to hold no more than 17.5 per cent of Fortescue.

Valin will buy 225 million newly issued shares and buy 275 million Fortescue shares from US-based hedge fund Harbinger Capital.

"If the share subscription agreement gains the required regulatory approvals, Valin's equity in Fortescue will increase to more than 16 per cent of the expanded issue capital," Fortescue said in a statement.

Valin chairman Li Xiaowei said in a statement that Valin is "pleased to provide Fortescue with the capital necessary to underpin the development of Fortescue's impressive project pipeline, which will create new jobs and accelerate the growth of a world-class mining company."

Fortescue chief executive Andrew Forrest said Valin "should facilitate enhanced access to China's financial sector."

Forrest, who owns 35 per cent of Fortescue, said in August his company would remain Australian controlled.

The Valin deal needs the approval of regulators in Australia. (dpa)