Like we keep saying, China
needs resources, and Australia needs revenue. So despite any
political strains, Baosteel Group Corp. will be allowed to
buy up to a 19.9% stake in Aquila Resources Ltd. for A$285 million ($258 million), says Australia's Foreign Investment Review Board. The Chinese steel-producing giant will put vice president Dai Zhihao on the board of Aquila, an iron ore and coal company in Perth, Australia. The deal still requires Chinese regulatory approval.
Earlier this week, The Deal Pipeline (subscription required)
shows China's Yanzhou Coal Mining Co. Ltd. won approval from the Australian government for its A$3.5 billion purchase of Felix Resources Ltd., clearing the way for the biggest-ever acquisition of an Australian company by a Chinese firm.
A Deal Pipeline analysis of the transaction showed that Yanzhou had to agree to a host of unusual conditions that seem designed to create the cosmetic appearance of Australian dominion over Felix's future.
China Non-Ferrous Metal Mining Co. Ltd. was not so flexible. Restrictions imposed by the FIRB prompted the Chinese miner to
drop a $451 million deal to take a controlling stake in Lynas Corp. Ltd. Australia wanted China Non-Ferrous to cut its stake proposal to under 50%. Similarly, last September, the Aussie government limited Sinosteel Corp.'s stake in iron ore mining company Murchison Metals Ltd. to 49.9%.
Some are willing to negotiate, though, especially when there's military influence. After making China Minimetals Corp. revise its offer (some mines were too close to the Woomera missile range), Australian Treasurer Wayne Swan approved $1.8 billion cash offer for assets of Melbourne's Oz Minerals Ltd. According to Reuters, Australia's Defense Department gave a
thumbs down to a proposed joint venture between Wugang Australia Resources, a wholly owned unit of Chinese state-owned Wuhan Iron and Steel, and Australia's Western Plains Resources. That effectively nullified the deal.
China's footprint grows
In June, China Minimetals Corp. completed its $1.8 billion cash offer for assets of Melbourne's Oz Minerals. Bloomberg News recently reported Fortescue Metals Group Co., which missed a self-imposed deadline to secure $6 billion of funds from Chinese lenders, may still
obtain financing from China. And, earlier this month, Hanlong Mining Investment Pty. Ltd.
signed an agreement to become the controlling shareholder in Australia's Moly Mines Ltd. with a $200 million investment.
Though China relies heavily on mining giants like BHP Billiton Ltd. (NYSE:BHP) and Rio Tinto plc (NYSE:RTP), it is looking to
get a hold of "junior miners" as well. For example, Western Australian iron ore junior explorer FerrAus Ltd. announced plans to sell 12% of itself to China Railway Materials Commercial Corp. for about $12.6 million.
Strained ties between Australia and China were highlighted with a political tiptoeing back and forth between Australia and China over a possible spy/bribery ordeal involving Rio Tinto's Stern Hu and others, and Rio Tinto' decision to drop a $19.5 billion China deal, instead favoring a JV with BHP.
The
investigation of Hu's case was recently extended. -
Baz Hiralal
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