Shares of Centrex Metals Ltd jumped to a record in Sydney trading yesterday after the Australian government approved Chinese miner Wuhan Iron & Steel Group's (Wugang) A$271 million ($247 million) investment in the Australian iron ore firm.

Wugang will also acquire a 60-percent stake in the iron ore rights of five Centrex projects in South Australia that could contain up to 2 billion tons of resources, the company said yesterday in a statement to the Australian Stock Exchange.

Centrex shares jumped 10.9 percent to 71 cents on the exchange, the highest since the company began trading in July 2006.

Wugang shares rose 0.66 percent to 7.67 yuan yesterday on the Shanghai Stock Exchange.

Centrex said it has already got approval from China's National Development and Reform Commission for the deal.

Wugang will buy 15 percent shares in Centrex for A$10.1 million and become the Australian firm's second largest shareholder, and also have a seat on the Centrex board.

"The cornerstones are now in place to rapidly escalate our iron ore growth on Eyre Peninsula into a billion-dollar business," Centrex Chairman David Lindh said in the statement.

Under the deal, Wugang will also form a joint venture with Centrex to develop iron ore resources in South Australia.

Wugang is also acquiring a 50-percent stake in Centrex's port development project in South Australia.

The Wugang deal comes close on the heels of Chinese steelmaker Baosteel acquiring a 15-percent stake in iron ore explorer Aquila Resources and Yanzhou Coal Mining Co's $3.2-billion takeover of Felix Resources.

Wugang had in September sought to invest in South Australia, but faced roadblocks for the deal as the mines were near a missile testing range.

Insiders said relations between Chinese investors and Australia have always been complicated. Australian mining companies are welcoming Chinese investors to satiate their capital needs. However, many of Chinese firms are now running into local obstacles.

"It is essential for steel makers to ensure stable raw material supplies," said Du Wei, a steel analyst at consultant firm Umetal. "The Chinese government is also encouraging domestic investors to look for overseas investment avenues."

The Australian government, however, does not pose any hurdles for small mining projects. However, for large and mature projects, the situation is different. Since most of these projects do not have cash flow problems, the resistance often crops up when the Chinese investors want to take a controlling stake.