June 26 (Bloomberg) -- Sinosteel Corp.'s bid to gain a stake in Murchison Metals Ltd. was halted by the Australian government as it decides whether to allow the Chinese company to buy into the Perth-based iron-ore miner.

Murchison and Sinosteel are battling for control of Midwest Corp., another Perth-based iron-ore producer. China's second- largest iron ore trader has offered A$1.36 billion ($1.3 billion) in cash for Midwest.

The Foreign Investment and Trade Board prohibited the proposed acquisition by Sinosteel of Murchison assets, land and a substantial shareholding in the company for 90 days while it considers an application for approval of the transaction, the Federal Treasury said in a notice published yesterday in the Australian Government Gazette in Canberra.

An acquisition by Sinosteel would be the largest overseas metals takeover by a Chinese company, according to Bloomberg data.

Murchison and Sinosteel want to control Midwest's Weld Range iron ore deposit in Western Australia to meet demand from steel mills in the world's fastest-growing major economy.

To contact the reporter on this story: Garfield Reynolds in Sydney at greynolds1@bloomberg.net

Last Updated: June 25, 2008 18:04 EDT