Vale SA, the world's largest iron ore producer, has signed an initial agreement with Fortescue Metals Group Ltd. Under the agreement, Brazilian company acquires a minority stake in the Australian miner owned by billionaire Andrew Forrest.

The accord also aims creating new iron-ore blending joint ventures for customers in China, the top consumer around the globe. It empowers the Brazilian company to acquire as much as 15% of Forestcue. The stake values around A$1.4 billion ($1.1 billion), calculated on the basis of Monday's closing prices, reports Bloomberg quoting Neville Power, chief executive officer for the Perth based miner while covering a conference call with the latter on Tuesday.

Fortescue shares have been witnessed to surge 65% this year in Sydney trading following efforts to cut costs, plans making further reductions to its $6.1 billion net debt. Furthermore, prices of iron oars have started to soar in 2016 which also contributed to the upsurge in share prices. Prices of the steel making ingredient has jumped 19% up on Monday, the biggest one day gain in daily data since 2009, according to a report published in Daily News.

Prices of the iron ores have been soared since China's policy makers have signaled their willingness to buttress economic growth. This has boosted the outlook for steel consumption in the Chinese market, the world's top consumer. Under the agreement, a joint venture between Vale and Forestcue to blend iron ore at Chinese ports is expected to begin within six months, reports Yahoo Finance quoting the Forestcue CEO.