Swan gives China's Ansteel green light on Gindalbie

AUSTRALIAN Treasurer Wayne Swan has approved an application by China's Anshan Iron & Steel Group, or Ansteel, to buy a stake of up to 36.28 per cent in Australia's Gindalbie Metals, subject to certain conditions.

The deal will be closely watched for any indications on how Australia will rule on a proposed tie-up between Aluminium Corp of China (Chinalco) and Anglo-Australian mining giant Rio Tinto.

Mr Swan said the Gindalbie deal was conditional on Ansteel supporting the development of certain infrastructure in Western Australia, including the Oakajee port and rail project.

Ansteel would also have to retain equal ownership with Gindalbie of a pellet plant to be built in China to process iron ore from the joint venture Karara Iron Ore project it had with Gindalbie.

"These undertakings support Australian mining jobs and protect Australia's investment participation in the Chinese resources market," the Treasurer said. Ansteel, China's second-largest steelmaker by output, lodged its $162 million proposal to buy the Gindalbie stake in December and was asked by Australia's Foreign Investment Review Board to resubmit the application four times -- in January, February, March and April.

Australian approval for the investment was one of the last hurdles facing Ansteel and Gindalbie before construction of their $1.8 billion Karara iron ore venture in Western Australia.

The project will employ about 1200 people during construction.

"Ansteel's proposed investment will ensure that production at the Karara project proceeds, which will underpin the development of the $3 billion Oakajee deepwater open access port, north of Geraldton, and the open access railway for this new iron ore province," Mr Swan said.

Many Australian miners are struggling under excess debt they incurred during boom times, and a number have turned to deep-pocketed Chinese investors eager to secure a foothold in resource assets abroad.

But the proposed deals have sparked some concern that China may end up having too much influence over a key sector of Australia's economy.

By far the largest of the recent flurry of deals is the proposed $US19.5 billion ($25.8 billion) investment by Chinalco in Rio Tinto. This would give state-backed Chinalco as much as an 18 per cent stake in Rio, as well as direct stakes in a number of its mines.

The Rio deal, as well as other Chinese offers, has put public pressure on Mr Swan and Prime Minister Kevin Rudd. They must grapple with the thorny issue of ownership of Australian resource assets by state-controlled Chinese companies, set against Australia's need for investment at a time of tight global liquidity and sluggish commodity prices.

Ansteel had applied to increase its Gindalbie stake to 36.3 per cent from 12.6 per cent, via a placement of new shares.

Shares in Gindalbie were up 3c, or 3.75 per cent, to 83c.

Liu Jingyuan, head of publicity at Anshan Iron & Steel Group, was not immediately available for comment.

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