China Stance

Chinese firms eye smaller miners in Australia

By Hu Yang (chinadaily.com.cn)
Updated: 2009-09-09 16:05

China Guangdong Nuclear Power Holding Co (CGNPC), one of China's major nuclear power groups, has offered to buy 70 percent of Australian uranium explorer Energy Metals shares, the company said Tuesday.

China Uranium Development Co, a subsidiary of CGNPC, will pay A$83.6 million ($72.1 million), or A$1.02 per share, for the deal. The board of Perth-based Energy Metals recommends the takeover, saying CGNPC's strength will help it transform "from explorer to developer and producer".

The case, now waiting to be approved by Chinese and Australian regulators, is only one of the intended or approved acquisitions by Chinese firms in Australia; on the same day, Beijing-based China Railway Materials, another State-owned company, agreed to buy stakes in two small Australian iron ore explorers.

China Railway will buy an 11.4-percent stake in United Minerals Corp and a 12-percent stake in FerrAus, the two Australian companies said yesterday in separate statements. Both agreements include talks for sales accords with China Railway for future ore output.

CGNPC and China Railway Materials' moves may imply that some Chinese firms have switched the battlefield of acquisition in Australia to smaller companies.

Australia's resources are mainly in the inner land area where infrastructure is not as well developed and capital is needed for exploration and transport, and companies in China, a huge consumer of energy and minerals, are actively seeking cooperation with Australia with ample capital from the 4–trillion-yuan stimulus package in their pockets.

Despite the setback of Chalco's failure to take over Rio Tinto, and the more stringent approval procedures due to the Rio Tinto case, Chinese companies are still lining up to invest in Australia, a country rich in mineral and other resources.

In August, China's Yanzhou Coal was permitted to spend $2.8 billion to take over Australian miner Felix Resources, and a $41 billion gas deal between PetroChina and Exxon Mobil, the biggest Sino-Australia trade deal ever, was approved on Sept 3.

Many Chinese firms' takeover deals are currently on a check list of Australia's Foreign Investment Review Board, including a rare earth deal worth $400 million and Baosteel's $240 million takeover proposal of Aquila.

Han Xiaoping, CIO of China energy site china5e.com, said Australia also benefits from those deals: "China and Australia, the former is a market and the latter a producer, they could complement each other."