** Shares in Australia's Fortescue FMG.AX rise 1% to A$19.1
** Gains in-line with 0.2% rise in local mining index .AXMM
** FMG on Tuesday offered to buyout smaller iron ore miner Red Hawk RHK.AX for A$254 mln ($158.37 mln)
** Red Hawk is the owner of a key iron ore deposit near Fortescue's existing Pilbara mines
** FMG is the logical owner of the asset given proximity to its existing infrastructure at Solomon Hub in Pilbara, says Morgan Stanley analysts
** Brokerage expects FMG to generate EBITDA of around A$2/ton at the potentially newly acquired Blacksmith iron ore project to offset the transaction price
** The asset would also add extra mine life to the depleting Solomon hub - MS
** FMG up 4.6% YTD; RHK shares up 0.8%
($1 = 1.6038 Australian dollars)