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Baosteel iron ore bid re-examined

(China Daily)
Updated: 2009-10-09 08:15

Baosteel Group Co, China's largest steelmaker, has been asked by the Australian government to resubmit its application to invest $240 million for a 15-percent stake in iron ore explorer Aquila Resources Ltd, the Australian media reported.

According to the Australian Financial Review, Baosteel resubmitted its application as requested by the Foreign Investment Review Board (FIRB) this week but it did not make it clear why the request was made.

Baosteel could not be reached for comment during China's national holiday.

FIRB is currently considering at least six investment proposals from Chinese state-owned enterprises, including a $3-billion bid from Yanzhou Coal Mining Co Ltd to acquire Felix Resources.

In September, Yanzhou Coal was also asked to resubmit its takeover application.

China Nonferrous Metal Mining Group Co (CNMC) was blocked from investing $222 million in rare earth miner Lynas Corp in September. FIRB ordered that CNMC's stake in Lynas should not exceed 50 percent.

Related readings:  Sinochem to acquire Australia's Nufarm  Australia-China iron ore mine given green light  Baosteel to buy 15% of Australia's Aquila  China, Australia ink $41b gas deal, biggest ever

Reuters cited a senior FIRB official as saying that the board preferred not to see foreign majority stakes in new mining projects.

FIRB said the Australian government's preference is for state-backed entities to take minority stakes in junior Australian miners, and that it will assess whether deals are in the national interest on a case-by-case basis.

In late August, Baosteel and Aquila agreed that Baosteel would invest up to $240 million in Aquila for up to 43.95 million new shares issued by Aquila - a 15-percent stake.

Under the deal, Baosteel will also back Aquila to gain low-cost financing from Chinese financial institutions for its major projects, including the West Pilbara iron ore project.

Tony Poli, executive chairman of Aquila, said that the deal should have no problem with FIRB after signing the agreement.

"They (Baosteel) have no control over the company, will appoint one director to the board. The strategic cooperation is all about assisting Aquila," Poli was cited by the Australian media as saying.