As iron ore prices rebound, Vale, the world’s largest iron ore producer, has signed a preliminary agreement with Fortescue Metals Group, under which Vale may acquire a minority stake in the latter. Australian mining company Fortescue Metals Group is the world’s fourth-largest iron ore producer.

Speaking on Tuesday’s conference call, Fortescue CEO Neville Power said that under the agreement, Brazil’s Vale could acquire up to 15% of Fortescue’s equity. The agreement also allows the two companies to establish a joint venture to jointly develop new mines. According to Bloomberg, based on Monday’s closing price, shares representing this stake are worth $1.1 billion. Analysts say the move is aimed at enabling these two industry giants to establish and consolidate their market presence in China.

Under the agreement, Fortescue’s lower-grade iron ore will be blended with Vale’s high-grade iron ore and sold to China.

Neville Power also stated that Fortescue is expected to sign a more formal agreement with Vale in the coming months, and the two companies could begin selling blended products to China within the next six months.

Bloomberg, citing Evan Lucas, a market strategist at IG, reported that Vale has offered what are considered the lowest-ever shipping rates for iron ore, which will give Vale an opportunity to enter the Australian market—a market it had never previously tapped into.

According to Reuters, Hunan Valin Steel Co., Ltd., China's second-largest steelmaker, holds approximately 14.7% of Fortescue's equity.

As reported by Wall Street Insights yesterday, iron ore prices surged on Monday. The landed price of 62% grade iron ore delivered to Qingdao Port in China jumped by 19%, marking the largest intraday increase since records began in 2009, reaching $63.74 per ton. During Monday’s overnight trading session in China, several black commodity futures—including hot-rolled coil, threaded steel bars, and iron ore—opened at their daily upper limits.