Australia to decide in 90 days on Sinosteel takeover of Murchison

June 26, 2008

June 26th (International Herald Tribune) – Australia will decide within three months whether it would be in its interest to allow China’s steelmaker Sinosteel Corp. to increase its stake in Australian iron ore miner Murchison Metals Ltd., the government said Thursday.

Australia’s Foreign Investment Review Board announced Wednesday that state-owned Sinosteel is barred for 90 days from buying a “substantial shareholding” in the Western Australia state miner.

Sinosteel already holds a 2.4 percent stake in Murchison but applied to the government last month to increase that holding.

National newspaper The Australian reported Thursday that the 90-day delay signaled a significant toughening of the government’s approach to Chinese investment in Australia.

However, Treasurer Wayne Swan, who makes the final decision on such foreign acquisitions based on a national interest test, said the move merely sets a firm timetable for his ruling.

“We welcome foreign investment. We welcome it from everywhere, including from China. But we will apply decisions on a case-by-case basis in the national interest,” Swan said.

Swan declined to discuss the merits of Sinosteel’s acquisition of Murchison, a relatively small player in Australia’s growing iron ore industry.

The newspaper said the government is apparently concerned about any consolidation of Chinese control in the vicinity of the Murchison mine after clearing Sinosteel in January to buy 100 percent of Midwest Corp., another iron ore miner in the area.

Earlier this month, Sinosteel increased its stake in Midwest to 40 percent, as it pursues a takeover.

The rise increases Sinosteel’s chances of spoiling a rival bid for Midwest from Murchison, which already holds a 10 percent stake in Midwest.

Government-backed Chinese steel and other companies have become more aggressive in their global effort to secure the raw materials needed to keep up with China’s galloping economic expansion. Interest has increasingly fallen on Australia, the world’s biggest exporter of coal and the second biggest exporter of iron ore.

Sinosteel this week agreed to an 85 percent price hike for iron ore it buys from one of Australia’s largest miners, Rio Tinto.

Australian iron ore exports totaled 290 million metric tons (320 million U.S. tons) in the past year and are projected to reach 489 million metric tons (539 million U.S. tons) in 2012-13 fiscal year.

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