From: Reuters
Published April 27, 2008 02:17 AM

Australia says no block to China resource investment

By Michael Perry

SYDNEY (Reuters) - Australia said on Sunday no Chinese companies have been told to withdraw applications to buy into Australian resource firms, despite media reports Canberra was pressuring China to back away from such investment.

China's miners and steelmakers are looking to buy mining assets in Australia to lock in supplies of raw materials such as coal and iron ore to fuel an expected construction boom lasting decades and to ease reliance on resource sector heavyweights BHP Billiton <BHP.AX> <BLT.L> and Rio Tinto <RIO.AX> <RIO.L>.

"There's been no suggestion that China or any other investor should back off," Australian Resource Minister Martin Ferguson told Australian television.

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"As China makes investments, some will be rejected, some will be changed to meet our national interest test. That's no different to previous investments by companies out of key markets such as Japan and Korea," he said.

The Australian newspaper reported last Friday the government was discreetly pressuring the Chinese at high levels to back off and resubmit applications at a later date.

Australia's vast outback is rich with minerals, but its governments have resisted becoming merely a quarry for raw materials to fuel Asia's rapid expansion, despite counting iron ore and coal as its top generators of foreign revenue.

Early in April, China's No.6 steelmaker Shougang Group was rebuked by Australian regulators who judged it was behind two firms that were building up a large stake in Mount Gibson Iron Ore Ltd without making a formal bid.

Shenzhen Zhongjin Lingnan Nonfemet Co Ltd <000060.SZ> is bidding jointly with Indonesia's PT Aneka Tambang Tbk <ANTM.JK> for Australian miner Herald Resources Ltd <HER.AX> and state-owned MCC Mining has applied to buy a A$400 million ($373 million) iron ore project from Cape Lambert Iron Ore Ltd <CFE.AX>.

Others include top coal miners China Shenhua Group and China Coal Energy <601898.SS>, while Yanzhou Coal Mining Co Ltd <1171.HK><600188.SS>, China's No. 3 coal producer by market value, aims to buy Australian mines to boost its annual coal capacity there to 10 million tonnes in the next few years.

Chinese iron ore trader Haoning Group, China's second-largest private iron ore trader, is in talks to take a stake in Australian miner Brockman Resources Ltd <BRM.AX> in an effort to stabilize raw materials and shipping costs.

Brockman owns the Marillana project in Australia's iron rich Pilbara region, and plans to begin iron ore production of 10 million tonnes a year in 2009.

ON MERIT

"China is strategically placing a lot of money in Australia in the resources sector at the moment. Each of those investments will be considered on merit...," said Ferguson.

"State-owned investments will be considered in the same way which is private sector investments...," he said.

Australia has allowed smaller mining firms to fall into foreign hands, but has been protective of its corporate giants, blocking a takeover of oil company Woodside Petroleum Ltd <WPL.AX> by Royal Dutch Shell <RDSa.L> in 2000, citing national interests.

China's state-owned aluminum major Aluminum Corp of China teamed up with Alcoa Inc <AA.N> to buy a $14 billion stake in Rio Tinto earlier this year, but it bought only London-listed shares, since buying the Sydney shares would need government clearance.

The giant BHP was only granted approval to merge with South Africa's Billiton after a year, after giving assurances it would keep its headquarters and a stock listing in Australia.

Ferguson said that while a rigorous national interest test would be applied to foreign investment applications, Australia was open to foreign investment.

"It is a non-discriminatory investment policy for foreign enterprises. While we are very clearly going to make sure in terms of Australia's future, the national interest test is vigorously applied," he said.

Asked if the government was considering changes to foreign investment rules given the nature of China's state-owned investors, Ferguson said:

"The world generally, not only about potential Chinese investments but also sovereign wealth funds generally, is having a close look at these issues.

"That's the nature of the change in the market that is developing with the growth in China, and also India, yet to come onstream."

(Editing by Ramthan Hussain)

(michael.perry@thomsonreuters.com; Reuters Messaging: michael.perry.reuters.com@reuters.net; +61-2-9373 1804))

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