'They've looked at this before and now the price is in a zone that suits them,' a source said.

Fortescue's shares hit a 52-week low of A$1.825 (HK$9.25) last Thursday before closing at A$1.90 on Friday.

That represented a precipitous drop from the 52-week high of A$13.15 they traded at on June 25.

With the shares now down 74.67 per cent this year against a 40.88 per cent fall in the benchmark ASX 200 Index, Mr Forrest called a media conference last Thursday during a tour of Chinese steel mills to dismiss rumours that the group was in search of fresh funding and some of its cargoes had been returned by Chinese steelmakers.

The group was a 'firm friend' of China, he said.

Mining shares have been among the worst hit this year as commodity prices plummeted on shrinking economic growth and reduced demand for the natural resources used to build infrastructure, such as steel.

CIC declined to comment and Shenhua and Baosteel could not be reached for comment.

Mr Forrest said on Thursday that Fortescue's cash position was secure and the group was not trying to raise funding.

A spokesman for the company declined to comment and referred back to Mr Forrest's statements.

At the start of the year, all three Chinese firms, as well as China Minmetals, had been talking with Mr Forrest and other shareholders but failed to seal a deal partially over price.

Minmetals, the largest alumina importer on the mainland, had tried to secure a controlling stake in the company, sources said at the time.

Mr Forrest said earlier this year he intended to maintain control of the group he had founded.

Australia's richest man before his company's share price tanked, Mr Forrest owns a 35.82 per cent stake in Fortescue, the third-largest iron ore exporter in Australia, which is worth US$1.24 billion. US-based hedge fund Harbinger Capital owns a 15.82 per cent stake, followed by US-based investment firm Leucadia National Corp with 9.9 per cent.

The company's market capitalisation stood at US$3.45 billion at the close of trading on Friday.

Fortescue began shipping iron ore in May from mines it owns in Western Australia. It forecasts 55 million tonnes a year in production, according to its website. It has sold exclusively to mainland steel mills thus far.

'There are lots of cheap companies out there and it's definitely a good idea when you buy into a strategic resource company,' said Tat Auyeung, managing director at Apex Capital Management.

The potential minority stake for CIC would be a diversification out of the financial sector where the sovereign wealth fund has made its initial investments.

CIC paid US$5 billion for bonds convertible into shares that if fully exercised would see it take a 9.9 per cent stake in US investment bank Morgan Stanley.

Last year, it paid US$3 billion for an about 10 per cent stake in US private equity giant Blackstone Group before its initial public offering. Since then, shares in both companies have dived.

Some market observers questioned whether a start-up like Fortescue was the right fit for CIC.

'CIC has said clearly they are looking for a return. Is Fortescue the company to do that? I'm not so sure,' said one mining specialist.

Some metals experts also discounted Baosteel joining in a bid with the sovereign wealth fund because of its bearish outlook on the mining industry.

Coveted assets

Founder Andrew Forrest owns 35.82 per cent of Fortescue Metals

As of Friday, the iron ore producer's market capitalisation stood at, in US$: $3.45b