China steel company Sinosteel has agreed with Australian iron ore producer Fenix Resources to purchase half of its output at its newest mine. Sinosteel had been consolidated with state-owned competitor China Baowu Steel Group.

Fenix Resources confirmed it had agreed to sell half of its production from its Iron Ridge mine in Western Australia. The other half will be sold to Hancock Prospecting's Atlas Iron - an Australian company owned by the country's richest woman Gina Rinehart.

Fenix Resources was given approval to mine the area in September. The mine is expected to produce 1.25 million tons of ore each year. Fenix expects to start production later this year with its first shipments in early 2021.

Sinosteel's decision to increase ore purchases from international suppliers was prompted as a new boom in public works and property in China follows the pandemic.

The company's merger with China Baowu Steel, which was made official by China's State-owned Assets Supervision and Administration Commission over the weekend, will help its finances and strengthen its operations. Both companies have yet to make an official statement regarding the merger but the move is in line with the government's plans to consolidate fragmented state-owned companies in industries such as energy, steel and power.

According to sources close to the merger, Sinosteel's operations and assets will remain unchanged. Details of consolidation of assets and operations are still being discussed.

Last year, China said it plans to have its state-owned steel companies control roughly 60% of the nation's production capacity by 2020. Officials said they will merge five of the country's largest coal producers into a one company that can match the output of other countries. The new state-owned coal company will absorb Datong Coal Mine Group, Yangquan Coal Industry Group, Shanxi Lu'an Mining Industry Group and Shanxi Jincheng Anthracite Mining Group.