Jiuquan Iron and Steel Group (Jiu Steel), northwestern China's largest steel maker, has secured approval from Gansu Provincial People's Government to set up a joint venture with Kazakhstani mining company International Mineral Resources (IMR), in order to gain access to Kazakhstan's rich iron ore reserves, according to industry reports.

Jiu Steel will pay RMB 30 billion (US$4.37 billion) in the form of assets for a 51% stake in the joint venture while IMR has agreed to pay RMB 10.373 billion for the remaining 49% stake. IMR would supply iron ore at prevailing market prices to Jiu Steel in the future. The cooperation agreement will have a long tenure of 50 years.

The country's 16th-ranked steel maker will contribute its entire steel production assets and mines, as well as its holdings in its Shanghai-listed unit, Gansu Jiu Steel Group Hongxing Iron and Steel Co.<600307>, and in another firm, Yuzhong Iron and Steel Co., to the joint venture.

In the face of surging prices of iron ore, China, as the world's biggest producer and consumer of steel, is encouraging domestic steel producers to form partnerships with foreign firms to obtain supplies of iron ore from abroad. Mergers and acquisitions have become increasingly common within the domestic sector, as part of a government-led effort to create big Chinese steel players which can negotiate with global mining giants on an equal footing.