By Jason Simpkins
The Australian government blocked China Minmetals Corp's $1.8 billion for the Oz Minerals Ltd. Friday, on the grounds that the Melbourne-based company's flagship mine is located in a military zone. The block is the latest development in an ongoing political dispute over whether the government should Chinese interests to acquire large stakes Australia's prized mining assets.
Australian Treasurer Wayne Swan said that "alternative proposals" by Minmetals would be considered, but only if they do not include Oz's Prominent Hill gold and copper mine, which is located in the Woomera Prohibited Area – a weapons testing facility.
"An important part of this assessment is whether proposals conform with Australia's national security interests, in line with the principles that apply to foreign government-related investments," Swan said in a statement. "The Woomera Prohibited Area weapons testing range makes a unique and sensitive contribution to Australia's national defence."
However, some critics of the decision don't see national security as an issue.
"," wrote John Duie, a columnist for The Australian. "If China or anyone wanted to spy on Woomera, and few would, all you would need to do would be to log on to Google Earth rather than pay more than $4 billion to buy a gold and copper mine."
Oz Minerals will have to spend the weekend recasting the deal, which is crucial to the company's survival. Oz has $1.3 billion in loans that must be paid back by March 31.
"Oz Minerals remains in constructive negotiations with its banks regarding the pending extension of certain of its loan facilities due on March 31," Andrew Michelmore, the company's Chief Executive Officer, said.
Oz has requested an extension, which likely will be granted.
"OZ Minerals lenders will extend the deadline. Most of the banks are currently in the midst of getting their internal approvals," a lender to OZ who asked not to be named told Reuters.
Controversial China Bids
Minmentals' attempted takeover of Oz is the least controversial of three Chinese bids for Australian assets that are pending government approval. Combined, the deals are worth more than $30 billion.
The other two deals are Hunan Valin Iron and Steel Co.'s planned $829 million (A$1.2 billion) investment in Fortescue Metals Group Ltd. and Aluminum Corp. of China's (ADR: ACH) $19.5 billion stake Rio Tinto PLC (ADR: RTP).
Chinese investment has been hotly contested by some quarters of Australia's government, who feel Australia shouldn't be quite so willing to place large portions its resource sector firmly into Chinese hands. Swan's statement today followed a dramatic escalation in rhetoric Thursday when Malcolm Turnbull, Leader of Australia's Opposition party, accused Prime Minister Kevin Rudd of acting like a "spokesman" and a "roving ambassador" for China rather than looking after Australia's national interest.
"The Australian government would never be allowed to buy a mine in China. So why would we allow the Chinese government to buy and control a key strategic asset in our country," said the ads, which aired in the capital of Canberra and Joyce's home state of Queensland, where Chinalco will mine new assets.
The block of Minmetal's attempt to acquire a struggling Australian company, casts doubt on whether other deals being reviewed by the government will pass.
"The folks at Rio Tinto will now be busily firming out options B, C and D because, based on the nonsense trotted out by Swan yesterday, they can have no confidence in getting approval for their Chinalco deal," said The Australian's Duie.
The case against allowing Chinese interests to take large stakes in overseas companies was bolstered last week, however, by Beijing's intervention in the Coca-Cola Co's (KO) attempted takeover of China Huiyuan Juice Group Ltd.
China's Ministry of Commerce blocked the deal saying the biggest takeover of a Chinese company failed to meet the country's anti-monopoly law and would be "negative for competition."
News and Related Story Links:
- The Australian:
- The Age:
Minmetals' bid for OZ comes unstuck
- Money Morning:
Rio Tinto Appointment Fails to Calm Merger Fears in Australia
- Financial Times:
Australia bars China bid for Oz Minerals