Sinosteel Deal with Murchison Metal Faces Delays

Submitted by Craig Strzelecki on 27 June, 2008 - 09:58

It was officially revealed today that Rudd government has officially prohibited any move by China's state owned Sinosteel to acquire stakes in Murchison Metal. The Foreign Investment Review Board would delay its decision for 90 days about Chinese take over bid on West Australia's mining company. Rudd government is planning for new regime that would limit foreign stakes in Australian companies or their take over. Treasurer Wayne Swan stated that government's move was in line with the "national interest of the country". However, the Opposition Treasury spokesman attacked the government that it is risking future investments by delaying the matter. It also stated that the market stands "confused" about criteria used by the government to determine applications from Chinese investors for investments in the country.

China's second largest iron ore trader has asked for approval from Australian government to acquire "substantial" stake in Murchison Metals Ltd. that would enable it to control A$3 billion mining project. It currently holds 2.4 percent stakes in Murchison Metals and 43.62 percent stakes in Midwest. It already has obtained approval from the FIRB in January 2008 for take over of Midwest Corporation.

However, Murchison Metal issued a statement that its merger with Midwest remains unaffected and the merger shall go ahead as planned. The merger shall not be affected by changes in foreign investment restrictions in the country.

Government's decision on Sinosteel would finally reflect its stand on takeover of Australian mining companies and assets by foreign investors especially large state-owned companies. An approval from the Rudd government would lend a prime position to Sinosteel in West Australia which is an emerging iron ore province in the country. This region now stands as the prime focus in the tangled web of national interest and corporate tussle. It is important for the Rudd government to set a ceiling for investments by state-owned companies without upsetting the obligations under international treaties.

The delay in government's decision forced the shares of Midwest Corporation and Murchison Metals to take a journey downhill. Murchison shares dipped 1.97 percent lower at $3.49 while Midwest shares experienced a 2.74 percent fall and closed at $6.40.

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