Sinosteel gets the nod on Murchison

ONE week after clinching its $1.36 billion takeover of Midwest, China's Sinosteel has been granted permission to acquire up to 49.9 per cent of the iron ore miner's neighbour, Murchison Metals.

The Federal Treasurer, Wayne Swan, yesterday approved Sinosteel's application to increase its stake in Murchison.

To reach the maximum ownership threshold allowed by the Government, Sinosteel would have to make a proportional takeover offer for Murchison.

Other options include a consortium bid or capping its interest in the miner at the takeover threshold of 19.9 per cent. Sinosteel already has a 2.6 per cent stake in Murchison.

An immediate move is not required, since Sinosteel has approval to increase its stake within 12 months.

The Chinese company previously said it was reluctant to increase its stake in Murchison until the miner resolved issues regarding the quality of its iron ore resources and its continuing legal dispute with Chameleon Mining.

But following the recent sharemarket rout, Murchison would now be a much cheaper investment. Its shares closed 12c higher at $1.22 on Friday, down from $4.80 in May.

Mr Swan's statement did not make reference to any limits on Sinosteel's potential board representation at Murchison.

Last month, the Treasurer gave Chinalco permission to increase its stake in Rio Tinto's London-listed arm to 14.9 cent, but noted that the Chinese company had undertaken not to seek any board seats.

Chinalco's $US14 billion dawn raid on Rio shares in February prompted the Rudd Government to reiterate its policy on foreign investment, and closer scrutiny of investment applications from state-backed entities.

If Sinosteel chooses to exercise its new-found right to purchase a 49.9 per cent stake in Murchison, it would become the dominant force in the burgeoning mid-west iron ore region.

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