The company that branded itself as The New Force in Iron Ore this afternoon announced it had received approval from the FIRB and Federal Treasurer Wayne Swan for one of its major iron ore customers Hunan Valin Iron & Steel Group Co Ltd to become a major shareholder.

Unlike the OZ Minerals scenario with China Minmetals, the green light for Valin to invest $A644.8 million ($US 445 M) for 260 M new shares, was not desperation stakes, though it will put to rest some of the rumour mongering on Fortescue Metals's (ASX: FMG)  financial well being and may well kill off some of the short selling that has apparently been in play in recent months.

The investment will see Valin become a 17.4% stakeholder through this placement and an earlier announced purchase by Valin of 275 M shares from an existing shareholder.

Fortescue's chief executive Andrew (Twiggy) Forrest said the total Valin stake remains below the 17.55% standstill maximum shareholding agreement agreed between Fortescue and Valin as part of the original Share Subscription Agreement.

Forrest said the funds raised through the Valin placement would provide extra strength to Fortescue's balance sheet as the company consolidates its base 55 million tonne per annum infrastructure platform.

A few months ago Fortescue placed on hold the development of its second mine at Christmas Creek but resumed its development about the time negotiations with Valin reached a positive state. The first mine, Cloudbreak, shipped its first 2 million tonnes consignment to China last July.

All of Fortescue's ore contracts are with Chinese companies.