Fortescue Metals Group shares have surged more than 10 per cent on Chinese whispers of a major foreign buy-in and a lift in the iron ore price.
Australia's Foreign Investment Review Board (FIRB) is considering applications about a possible investment in Fortescue involving Chinese state-owned steel producer Baosteel and Chinese conglomerate CITIC.
Shares in the Pilbara iron ore miner closed 23 cents, or 10.6 per cent, higher at $2.40 on Tuesday.
Despite the share price boost, Fortescue said it does not comment on market speculation.
"Fortescue is not aware of FIRB applications by third parties and is in compliance with its continuous disclosure obligations," the company said in a statement.
The Australian Financial Review reports Chinese companies have applied to Australia's FIRB about a possible investment, but says it is not known whether Baosteel or CITIC are behind the applications.
Perth-based Fortescue has recently come under pressure because of lower prices and last month secured a $US2.3 billion ($A2.96 billion) debt refinancing.
Analysts say the pure play iron ore miner's net debt of $US7.4 billion ($A9.46 billion) makes it vulnerable to iron ore price falls and a potential takeover target.
Morningstar resources analyst Mathew Hodge said speculation about Chinese investment and a two per cent increase in the iron ore price to $US61 a tonne overnight had lifted the stock.
"A lot of the leverage in this stock is sentiment driven," Mr Hodge said.
"Are they going to get into balance sheet trouble or are they going to be okay?
"The idea that Chinese might invest, maybe that helps them out."
Mr Hodge said it was in China's interest to keep Fortescue's ore supply in the market, but it didn't mean Chinese companies had to be equity holders.
He added that China would be eager to avoid Fortescue going into administration which could spark a takeover by iron ore giants Rio Tinto or BHP Billiton.
Still, Fortescue had too much debt and was probably considering selling a stake in some mines, infrastructure or equity, he said.
"This is a single commodity producer without a cost advantage that's got a lot of debt, Mr Hodge said.
"Ultimately that's unsustainable and something will have to change."
A spokesman for the Treasurer Joe Hockey declined to comment on any FIRB application and a Treasury spokesman said the FIRB was unable to provide comment on individual applications.
The speculation comes after Fortescue chairman Andrew Forrest recently said BHP and Rio were manipulating the market to drive out smaller players, but his call for a parliamentary inquiry into the industry was rejected by the federal government.
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