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Australia to Up Scrutiny of Foreign Mine Investments

Australia will increase its scrutiny of foreign investments in Australian mining companies, Treasurer Wayne Swan said on Friday, particularly when the investor is also a major customer seeking a majority stake.

Factory, Anshan, China
AP
Factory, Anshan, China

Speaking to the Australia-China Business Council, Swan said Australia needed to make sure that Australian companies remained reliable suppliers to all current and potential trading partners.

China's increased interest in Australia's mining industry, a major supplier of the iron ore, coal, nickel and other materials China's booming economy needs, has aroused concerns Australia could lose control of its natural resources to Beijing-backed firms.

"In particular, Australian governments, now as in the past, are particularly attentive when the proposed investor in an Australian resource is also the buyer of that resource or linked with the buyer of the resource," Swan said. "Our predisposition is to more carefully consider proposals by consumers to control existing producing firms."

Australian miners, ranging from global heavyweights BHP Billiton and Rio Tinto to small explorers, are in the sights of state-backed Chinese firms.

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China needs stable supplies of resources to fuel its booming economy, and has been stepping up investment in and overtures to resource-rich countries and resource companies worldwide.

China's Sinosteel launched a A$1.36 billion (US$1.3 billion) bid for iron ore prospector Midwest, and has expressed interest in Murchison Metals.

China's state-owned Aluminium Corp of China (Chinalco) and its U.S. partner Alcoa earlier this year bought a 12 percent stake in Rio Tinto.

Swan said Australia remained open to Chinese investment, with applications for Chinese investment in Australia reaching almost A$30 billion since last December.

He said he had approved a Chinese investment proposal on average once every nine days since he became Treasurer in December 2007.

"But it follows that as the proposed participation by a consumer of the resource increases to the point of control over pricing and production, and especially where the resource in question is already developed and forms a major part of the total resource, or where the market disciplines applying to public companies are absent, I will look more carefully at whether the proposal is in Australia's national interest," he said.

In February, the government said it would tighten scrutiny of investments into the country by state-owned funds in a sign of unease at their growing investment clout.

Major foreign investments and takeovers need approval of the Foreign Investment Review Board and the Treasurer, who must decide if the investment is in the national interest.

Swan said the key to foreign investment decisions was whether an investment would maintain a market-based system, with companies responsive to shareholders and where sales are driven by market forces rather than strategic or political motives. "We usually welcome and encourage some participation by the buyer, because that offers the buyer some security of supply and the seller some stability in the market," he said.

"But we need to ensure that investment is consistent with Australia's aim of ensuring that decisions continue to be driven by commercial considerations and that Australia remains a reliable supplier in the future to all current and potential trading partners."

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