Australia's third biggest iron ore producer said on Tuesday that it was also considering an institutional placement, as well as negotiating a hybrid funding package with China Investment Corp (CIC), the sovereign wealth fund.
CIC is understood to be considering an even bigger investment to help Fortescue reduce debt.
State-owned Valin's purchase underlines how Chinese groups are seeking to take advantage of funding difficulties and slumping stock market valuations to secure better access to Australia's mineral riches.
Ahead of last night's announcement, analysts at Macquarie estimated Fortescue would need additional capital of A$731m, above internally generated funds, to finance its expansion.
Like other recent Chinese investments in Rio Tinto and Oz Minerals, Valin's purchase will need approval from Australia's Foreign Investment Review Board. There has been intense political debate in Canberra about the influx of Chinese money.