Australia has approved a bid by China's Baotou Iron and Steel to take a 40 million dollar (S$8.12 Million) stake in a magnetite project run by Centrex, the mining firm said Thursday.

Under the deal, given the nod without condition by the Foreign Investments Review Board, Baotou will take up to 50 percent of Centrex's deposit of magnetite, or iron oxide, in Bungalow, South Australia.

"We have been in discussions for many months and it is very pleasing that Centrex and Baotou can now accelerate exploration at Bungalow," said Centrex chairman David Lindh, announcing the approval.

Baotou, China's tenth-largest steel producer, would pay 16 million dollars towards exploration and study of the site, with the remaining 24 million going towards a final feasibility phase, Centrex said.

The Chinese company is Centrex's second-largest shareholder, with a stake of about 8.3 percent.

Wuhan Iron and Steel Co won approval earlier this month to take a 271 million dollar stake in Centrex iron ore tenements on South Australia's Eyre Peninsula.

Chinese state-owned firms have made a series of bids for Australian resources this year, which have included the approval last month of Yanzhou Coal's 3.5 billion dollar takeover of miner Felix, the biggest-ever by a Chinese firm.

On a visit to Australia recently China's vice premier Li Keqiang urged a sweeping new era in ties with Australia including a free-trade deal, marking a dramatic turnaround in frosty relations.