Fortescue Metals Group, Australia's third biggest iron ore exporter said that Formosa Plastics agreed to invest USD 1.15 billion in a planned project in Western Australia that includes Baosteel Group.

Formosa would acquire a 31% interest in the FMG Iron Bridge joint venture for USD 123 million and provide the first USD 527 million of capital spending to develop the first stage of the project, 100 kilometers south of Port Hedland.

Fortescue said that FMG Iron Bridge, jointly owned by Fortescue and a unit of China's Baosteel, owned the North Star and Glacier Valley iron ore deposits which have a combined iron ore resource of 5.2 billion tonnes. Taiwan's Formosa agreed to buy as much as 3 million tonnes a year of iron ore at market prices to supply a steel mill being built at Ha Tinh in Vietnam.

Mr Yang Hung chi president of Formosa Resources said that "This investment will secure a substantial long term resource to complement the group's manufacturing activities."

First production of 1.5 million tonnes a year could begin in early 2015. Formosa would prepay USD 500 million upfront to Pilbara Infrastructure to access Fortescue's Herb Elliott Port under separate arrangements.

The deal was subject to approval from the Australian Foreign Investment Review Board and the Taiwan Investment Commission, which was expected to be completed next month.