Temasek Holdings (TEM.UL) is selling its entire 4% stake in Australian iron ore miner Fortescue Metals Group (FMG.AX) to raise up to US$877 million ($1.12 billion), a source with direct knowledge of the matter told Reuters on Wednesday.

The move is part of a broader rejig of the investment holdings of Temasek, Singapore’s state investor. Over the past year it has raised cash through the sale of bonds and some of its investments, raising expectations among some bankers it could be preparing for a large investment.

Temasek, which had a US$134 billion portfolio as of end-March 2010, is offloading 128.9 million shares in Fortescue, Australia’s third-biggest iron ore miner.

The shares are being offered in a range of A$6.76 ($8.70) to $6.88 each, a discount of between 4.3 and 6.0% to its last traded price, IFR, a Thomson Reuters service, reported.

Temasek declined to comment.

Last year Temasek sold a 40-year $1 billion benchmark bond soon after it sold 700 million sterling worth of bonds. It also sold a US$607 million stake in Hana Bank and a US$953 million stake in Fraser & Neave (FRNM.SI).

Temasek, whose sole shareholder is Singapore’s Ministry of Finance, came in for criticism over its loss-making investments into Western banks such as Bank of America/Merrill Lynch (BAC.N) and the departure of foreigners from its management team.

Still, Temasek increased its exposure to the financial sector last year by taking up BofA’s entitlements in China Construction Bank’s (0939.HK) rights offer.

Morgan Stanley was sole book runner on the Fortescue deal, IFR added.