MOSCOW. Dec 5 (Interfax) - Magnitogorsk Iron & Steel Works (MMK) plans to slash capex a third to $800 million in 2012, the company's vice president for economics and finance, Dmitry Usanov, said during a conference call.

Planned capex is $1.2 billion in 2011.

MMK has offered to buy Australian iron ore company Flinders Mines. Based on a pre-feasibility study, investment in the company's Pilbara project is estimated at $1.25 billion, the bulk of it in 2013-2014.

Usanov said MMK did not plan to sell its 5% of Australian ore miner Fortescue to fund the Flinders Mines acquisition as the asset has potential. MMK is looking at various options to finance the Flinders acquisition.

MMK said last week it was looking to complete the purchase of Flinders Mines next March.

Flinders Mines, which holds licenses to a number of iron ore fields, said MMK had offered A$0.3 per share or A$554 million (US$537 million) for the whole company, representing a premium of 92.5% over its market price for the last three months and 111% over its price for the last six months. Its board voted unanimously to recommend the deal to its shareholders. Uralsib Capital analyst Dmitry Smolin has said the 5% of Fortescue Metals, valued at $700 million, could theoretically be used to fund the deal, Smolin said.

Flinders Mines holds licenses to a number of iron ore fields, some of them in Australia's Pilbara region, where world majors Rio Tinto and BHP Billiton are present. Production at the fields is slated to begin in 2014 and reach 15 million trillion of ore per year.

The flagship project is the Pilbara tenement, with resources of 917.3 million tonnes to JORC and Fe content of 55.2%. Work on the mine is due to begin in Q1 2013 and production should begin in Q4 2014. First-stage project investment is $484 million.

Then other project, Canegrass, is a magnetite ore field with an initially estimated 107 million tonnes and vanadium pentoxide content of 0.62%.

MMK only mines 30% of the iron ore it needs and buys the rest from Kazakhstan's Eurasian Natural Resources Corporation (ENRC). MMK has been unable to agree on a price for iron ore in Q4 2011 with ENRC or Russia's Metalloinvest and Severstal .

MMK holds the license to the Prioskolskoye iron ore field in Russia's Belgorod region and planned by September this year to reach a decision on the project, based on a feasibility study by Canada's Hatch.

MMK's Usanov said no decisions had yet been reached about the Prioskolskoye project, but that MMK had not shelved it and was still looking at the options.

ENRC has withdrawn a lawsuit filed suit that it filed with the Federal Court of Australia against MMK and its mining subsidiary