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Australia approves Chinese stake in Fortescue Metals
Sydney (AFP) March 31, 2009 Australia Tuesday conditionally approved Hunan Valin Iron and Steel Group's billion-dollar investment in Fortescue Metals Group, as debate rages over China's moves into the country's resources. Treasurer Wayne Swan has rejected a takeover bid by China's Minmetals and the government is still considering whether to allow Chinalco's 19.5 billion dollar stake in Rio Tinto. "Consistent with this approval and with its agreement with Fortescue, Hunan Valin will not hold above 17.55 percent in total," Swan said in a statement. Swan said he had also insisted that any Valin representatives nominated to the Fortescue board complied with a range of measures designed to prevent conflicts of interest between the Australian and Chinese firms. "They ensure the appropriate separation of Fortescue's commercial operations and customer interests, and support the market-based development of Australia's resources," he said. Canberra last week rejected a 2.6 billion dollar bid from China's Minmetals for OZ Minerals because one of its mines was in a restricted military zone used for rocket testing. Minmetals has now tabled a revised proposal. The government is also considering whether to let Beijing-owned Chinalco take a stake in debt-laden mining giant Rio Tinto. Several commentators have expressed concern over China buying up Australian resources to fuel its expansion. On Monday, the government accused the opposition of fanning anti-China sentiment to gain political capital. Fortescue chief executive Andrew Forrest said when the Valin deal was unveiled in February that the capital injection would help his company more than double its iron ore output to 120 million tonnes a year. Under the deal, Valin will subscribe to 225 million new Fortescue shares at 2.48 dollars a share, making a total of 558 million Australian dollars (382 million US). It will also buy 275 million existing shares from an institutional investor, representing another 778 million dollars. Valin chairman Li Xiaowei will receive a seat on the board as part of the deal. Fortescue holds rights to a massive 40,000 square kilometres (15,444 square miles) of Western Australia's resource-laden Pilbara -- an area larger than Taiwan. Forrest has moved to position Fortescue as the "third force" in Australian iron ore, competing with giants BHP Billiton and Rio Tinto to shuttle millions of tonnes to Asia. The company's success briefly made Forrest Australia's richest man last year but the value of his stake in Fortescue has tumbled as falling demand for iron ore has sent its share price down. Share This Article With Planet Earth
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