UPDATE: CHINA CONGRESS: Shougang: Won't Up Share In Mt. Gibson

Chinese steel mill Shougang Corp. doesn't plan to raise its stake in Australian miner Mount Gibson Iron Ltd. (MGX.AU), Shougang Chairman Zhu Jimin said Wednesday.

Shougang directly and indirectly holds about a 40% stake in Mount Gibson Iron, he said.

"We eat rice one mouthful at a time, and walk one pace at a time," Zhu said during a news briefing held on the sidelines of the annual session of the National People's Congress, China's legislature.

In January, Mount Gibson Iron shareholders approved offtake agreements with APAC Resources Ltd. (1104.HK) and China's Shougang Corp., the underwriting of a rights issue by the two companies and the placement of 110 million shares to Shougang, as part of a bailout for the cash-strapped Australian miner.

When the deal was first announced in December, APAC and Shougang were expected to underwrite the rights issue and take up most, if not all, of the stock that, together with the share placement, would see their combined stake in Mount Gibson rise to as much as 40.6%.

In discussing the annual iron ore negotiations between Chinese steel mills and global mining giants Companhia Vale do Rio Doce (RIO), Rio Tinto PLC (RTP) and BHP Billiton Ltd. (BHP), Zhu said the miners should accept the 2007 price level for iron ore before negotiating other details.

Zhu said Shougang is still working on expanding its plant in Peru, and may spend between US$700 million and US$1 billion on the project. However, he declined to say when the project would be completed. Shougang, through its Shougang Hierro Peru subsidiary, has owned Peru's only iron mine since 1993.

Shougang is one of several Chinese companies that have been expanding their interests in overseas resources, which has raised concerns of host governments over China's intention to secure raw materials' supply.

But Zhu dismissed such concerns.

"It seems that when the Chinese step out abroad (to invest in resources), there is a lot of hysteria," he said. "But you can't just put the ore in your pocket and walk away."

Zhu reiterated that Shougang's Caofeidian steel project in the Hebei province is due for completion in 2010 and the first phase of the two-phase project will have a production capacity of 4.85 million tons a year.

He said the first phase will be completed in April.

Zhu also said that Shougang continues to explore taking over a Guiyang steel mill located in the Guizhou province, a plan it has been discussing for a few years now.

-By Chuin-wei Yap, Dow Jones Newswires; 8610 6588-5848; [e-mail]