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Part of the Canning Basin in the Kimberley.
Part of the Canning Basin in the Kimberley.

UPDATE 1.15pm: Fortescue Metals Group has dipped its toe in WA's fledgling shale gas industry with an initial $4.2 million investment in Canning Basin minnow Oil Basins.

FMG agreed to pay a 40 per cent premium (3.5 cents a share) to take an 18 per cent stake in the Melbourne-based company via a placement of new shares.

Oil Basins said the funds would support development of the company's Canning Basin assets and help in further expanding its portfolio within “existing core areas of interest”.

Oil Basins has also agreed for FMG to take a 25 per cent share in its Derby Block exploration permit in exchange for $1.75 million as part of a subsequent gross $10 million free carry on a two-for-one basis.

Oil Basins has a 50 per cent stake in the Derby Block and is also the operator.

FMG will also be offered a seat on Oil Basins' board.

The deal represents FMG's first investment in the oil and gas sector.

Oil Basins shares soared one cent, or 32.26 per cent, to 4.1 cents by the close after hitting an earlier peak of 4.6 cents. FMG shares closed off four cents, or one per cent, at $3.96.