swan blocks chinese takeover of oz mine, page-67

More from the Australian. I don't think Wayne and Kev would have thought they were going to get such bad press from this decision:

Deal rejection a worry for Chinalco
Andrew Main, Business editor. March 28, 2009

KEVIN Rudd and Wayne Swan's knockback of Minmetals' bid for OZ Minerals features the sort of reasoning that old hands in the Chinese Government could understand: national security.

Woomera is barely used these days as a rocket range, since rockets now travel far further than the Simpson Desert, and it's now best known for having been a detention camp. But talking about the Prominent Hill mine's proximity to Woomera is a neat way to say "no".

Minmet was always pushing its luck to ask for 100 per cent ownership of OZ, despite OZ's near-fatal debt load, so the Government doesn't look as if it's picking on the bidder.

Plus Swan made clear last night that Minmet can have another go at the non-Prominent Hill assets. Consider this the end of round one, not the end.

The bigger question it raises is, what does this mean for Chinalco's much bigger bid for 18 per cent of Rio Tinto and a stake in some of its key assets? You'd have to be naive to assume the issues aren't related. Could being tough on one Chinese takeover be enough to show the Government is no pushover, and give it the freedom to wave others -- say, Chinalco -- through?

Our Mandarin-speaking Prime Minister clearly doesn't want to look anti-Chinese over Chinalco, particularly with China emerging as an economic superpower. Plus, of course, the Chinese are the only people around with enough money at the moment to rescue debt-burdened Rio at a stroke.

Rudd knows the big Chinalco-Rio issue is the level of Chinese government control and influence. He could score a win by letting Chinalco through with some tough demands on reducing its influence. It could require, say, one Chinalco nominee on the Rio board rather than the requested two. On that basis, this deal could be viewed positively by Chinalco.

But looked at another way, the Chinese Government's influence on Chinalco, which includes appointing the board, is much stronger than on little Minmet, and Minmet's just been knocked back on security grounds.

Extrapolate that and the Minmet refusal is a big worry for Chinalco management.

It would signal the Government's attitude to Chinese investment, that all Chinese state-owned companies will be considered an extension of the Chinese Government.

The first of the six principles for foreign investment laid down by Swan last year was that the purchaser had to be independent of its national government.

And looked at through the Minmet prism, it's anything but.