Australia's Murchison says no talks with Sinosteel

SYDNEY, May 2 (Reuters) - Australian iron ore prospector Murchison Metals Ltd (MMX.AX: Quote, Profile, Research), valued at nearly A$2 billion ($1.9 billion), said on Friday it was not in talks with China's Sinosteel on a possible takeover. Murchison was responding to an Australian stock exchange query about sharp moves in its share price. The stock has surged about 20 percent since Murchison said on Tuesday that Sinosteel had acquired 2.4 percent of its stock. The announcement triggered market and analyst speculation that Sinosteel could be preparing a bid. "The company has not been contacted by, and is not in discussions with, Sinosteel Corporation in respect of a possible takeover bid," Murchison said in a statement. Murchison revealed the Sinosteel stake on the same day fellow iron ore hopeful Midwest Corp (MIS.AX: Quote, Profile, Research) recommended a revised A$1.36 billion ($1.3 billion) offer from Sinosteel. Murchison has a market capitalisation of A$1.96 billion. Murchison is in partnership with Japan's Mitsubishi Corp (8058.T: Quote, Profile, Research) and, like Midwest, plans to build railways and a port from scratch to tap vast reserves of iron ore in the midwest region of Western Australia, where both companies have pegged out promising ground. Chinese steel makers have been stepping up their interest in Australian iron ore companies as a possible way of by-passing the soaring iron ore prices being charged by big producers like Rio Tinto (RIO.AX: Quote, Profile, Research)(RIO.L: Quote, Profile, Research), BHP Billiton (BHP.AX: Quote, Profile, Research)(BLT.L: Quote, Profile, Research) and Brazil's Vale (VALE5.SA: Quote, Profile, Research) in response to strong demand. Vale has already secured price hikes of 65-71 percent this year, with Rio and BHP pushing for more. ($1=A$1.07) (Reporting by James Thornhill; Editing by Jonathan Standing)