Australia's Fortescue says China deal probe extended

Australia has extended its review of Fortescue Metals Group's (FMG.AX) planned $770 million stake sale to a Chinese firm, the second such move in a week amid political unease about Chinese control over Australian resources.

Fortescue said in a statement on Thursday the Foreign Investment Review Board has ordered an extra 30 days review of the plan, under which the iron ore miner would sell a 16.5 percent stake to Hunan Valin Iron and Steel.

Earlier in the week the FIRB, which must approve foreign investments into Australian companies worth over $66 million, extended its review of Chinese aluminum maker Chinalco's $19.5 billion investment in Rio Tinto (RIO.AX) (RIO.L) for up to 90 days.

That deal, plus Fortescue's plans and a separate $1.7 billion takeover offer by China's Minmetals for Australian miner OZ Minerals (OZL.AX), which is also under FIRB review with an initial deadline of Friday, have sparked political controversy in Australia.

Some politicians have questioned why a Chinese state-owned entity should have a stake in a strategically and economically vital Australian industry, while others object because of China's human rights record and on the view that Australian firms would never be allowed to buy Chinese assets.

Australia's upper house Senate voted on Wednesday to start a non-binding inquiry process into foreign investment in Australia, though analysts said that while the move showed how sensitive the issue had become, it would not affect the FIRB rulings.

The FIRB must make a recommendation to the government on whether the deals are in the national interest. Australian Treasurer Wayne Swan will make a final decision.

Fortescue said it remains confident that the structure of the share subscription agreement will enable Valin to obtain FIRB approval.

It said the review would be extended by 30 days from March 25, when the FIRB's order is expected to be formally issued.

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