The West Australian government has invited China to be an investor in its $5.94 billion Oakajee port and rail project. The venture seeks to open up a new iron ore mine site in the state's Mid-West and make it WA's second major iron ore output behind Pilbara.

The bulk of WA's iron ore exports are sent to China, now the world's largest steel producer by output. Besides iron ores, China mainly sources from Australia its coking coal used in blast furnaces to manufacture steel.

The invitation for Chinese investment seeks to make up for the delays in the construction of the port and rail facilities due to Murchison Metals' inability to come up with its share of the project's funding. To solve the problem, Murchison agreed in early December to sell half of its stake to Mitsubishi of Japan, which now owns the venture 100 per cent.

On Wednesday, the Foreign Investment Review Board approved the Mitsubishi buy out of Murchison Metals' 50 per cent stake, although the deal is also subject to Murchison stockholders' approval at the company's meeting in February.

WA Premier Colin Barnett said that despite the sale of Murchison's stake to Mitsubishi, the state would still encourage Chinese participation.

"This is vital to the project because Chinese companies have major interests in Mid-West iron projects and China is likely to be the biggest customers for the region's iron ore," Barnett said in a statement.

The venture is made up of a port near Geraldton capable of handling 45 million tonnes of iron ore a year and a railway that could transport 100 million tonnes a year. The project would boost iron ore exports from WA by sea shipment at an annual growth rate of 10 per cent over current levels.

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