The signing of a $1.5bn agreement between African Minerals and China’s state-owned Shandong Iron & Steel Group should end some of the scepticism about the deal and broader reservations over the Aim market’s biggest company by market capitalisation.

The long-awaited deal would see Shandong acquire a 25 per cent stake in African Minerals’ Tonkolili iron ore project in Sierra Leone. With 12.8bn tonnes of estimated resources, it is one of the biggest iron ore prospects on the African continent. Its discovery and resulting announcements over the course of 2009 has triggered a more than 16-fold rise in African Minerals’ shares, although it is yet to start production.

The deal underlines China’s continuing appetite for African commodities. As well as the direct stake, Shandong also has the right to buy 25 per cent of Tonkolili’s future production at market value plus a guaranteed annual off-take of iron ore – eventually reaching 10m tonnes – at a market discount of as much as