Swan green-lights Chinese Fortescue bid

Federal Treasurer Wayne Swan has approved a deal which will allow a Chinese state-owned company to take an 18 per cent stake in mining company Fortescue Metals.

The $1.2 billion deal will allow Fortescue to raise funds for the next expansion phase of its iron ore mining operations in Western Australia.

Under the deal, any Fortescue board member appointed by the Hunan Valin Iron and Steel Group must not use their inside information when the companies are negotiating resource prices.

"Hunan Valin will report to FIRB [Foreign Investment Review Board] on its compliance with these undertakings," a statement from Mr Swan said.

"These undertakings ensure consistency with Australia's national interest principles for investments by foreign government entities, which I set out in February 2008.

"They ensure the appropriate separation of Fortescue's commercial operations and customer interests, and support the market-based development of Australia's resources."

Mr Swan said that penalties for non-compliance can lead to the director's removal from the company board.

He said under the proposal, Fortescue will issue new shares to Hunan Valin to raise funds for further expansion of its iron ore mining operations in the Pilbara.

"Hunan Valin also intends to acquire some shares from other shareholders," the statement said.

"Consistent with this approval and with its agreement with Fortescue, Hunan Valin will not hold above 17.55 per cent in total."

Fortescue says the deal will not compromise Australia's sovereignty.

FMG's operations manager Graham Rowley says the agreement is in the country's best interest.

"I think what we've established here is a fair investment in our equity together with an opportunity that allows Australia to say yes, this is a good deal for Australia," he said.Investment future

The foreign investment regulator is still considering Chinalco's $30 billion plan to increase its stake in Rio Tinto.

Meanwhile, the South Australian Government wants to meet Mr Swan on the future of foreign investment in mining in South Australia.

The Government last week rejected Chinese company Minmetals' takeover bid for OZMinerals on national security grounds.

Mr Swan will not allow the Chinese business Minmetals to buy OZMinerals' mining interests while they include the Prominent Hill mine in the Woomera Prohibited Area.

Oz Minerals is still in talks with Minmetals to try to close a deal which excludes Prominent Hill.

State Mining Minister Paul Holloway says OZMinerals keeping Prominent Hill would be good for South Australia.

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Tue 31st March 2009 - 07:41pm