According to a recent statement by the state-sanctioned China Iron & Steel Association (CISA), China has signed a deal with a smaller Australian miner - Fortescue Metals Group - which will sell it iron ore for 94 US cents per dry metric ton. The price is below the 97 US cents negotiated for this year's supplies with Japanese and Korean mills.

The deal with Fortescue apparently is China's endeavor to break the standoff with the three iron ore biggies - Australian miners Rio Tinto and BHP Billiton; and Brazilian miner Vale.

Saying that the deal settles Fortescue Metals' iron ore price contracts with Chinese steel mills for the 2009 second-half, Fortescue added that the arrangement will give it an assured outlet for its increasing production.

Elaborating further, Fortescue said that the price contracts signed with CISA and Baosteel Group entail a commitment by the Chinese mills to purchase nearly 20 million wet metric tonnes of ore during the July 1-December 31 period this year.

What is even more significant for Fortescue is that the CISA has also assured that the company will be given priority in terms of negotiations, in any, pertaining to iron ore prices for 2010.

Commenting on the deal, Fortescue CEO Andrew Forrest said: "This groundbreaking agreement cements the strength of the bilateral relationship between Australia and China in which mutual issues can resolved."