Mount Gibson Iron announced this morning that a member of the Shougang group had purchased 156.8 million shares held by Usmanov's investment vehicle Gazmetall, with the transaction subject to Commonwealth Foreign Investment Review Board approval.

Shougang and its partner Hong Kong-listed APAC Resources, which already holds a 20.3% stake in Mount Gibson, will now have a combined stake of 40.1% in Mount Gibson Iron, sparking speculation that the pair may launch a takeover bid for the iron ore play.

Mount Gibson managing director Luke Tonkin told MiningNews.net that the board was making inquiries into the Shougang transaction.

"We haven't seen the transaction details," he said. "We have seen the substantial shareholder notice which has just been released.

"It is the first time we have seen it, so until we see the detail of what the transaction involves, we continue to take advice both legal and otherwise and we will continue to follow inquiry and I can assure shareholders that we will act in the best interest of all of our shareholders.

"We need to get into the detail of the transaction and then determine with the advice we receive which way we will go."

Mount Gibson has appointed Freehills as its legal adviser and UBS Investment Bank as its financial adviser.

Shougang could become the second Chinese giant to make a bid for a Mid-West iron ore play after Sinosteel made an all-cash bid for Midwest Corporation late last year.

On Tuesday, Mount Gibson entered into a trading halt after announcing to the market that it was made aware of a "potential transaction concerning a material shareholding in the company" over the weekend.

The company, which has been involved in consolidation in the iron ore industry with the successful takeover of Aztec Resources in January last year, has dropped 6c this morning to $2.56 after trading resumed.