Ann: Change of Directors Interest - Appendix 3Y , page-8

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Chinese Investors Turned Off By Burgeoning Australian TaxesArticle November 15, 2011 5:52 PM EST

At least two major Chinese investors in Australia's resources sector expressed having second thoughts of furthering investment plans in the country's mining industry due to the escalating regulatory risks imposed by the mining and carbon tax laws.

Some analysts believe the Australian prime minister's attempt to set a price on carbon will fail despite Julia Gillard yesterday declaring 2011 a year of delivery and decision for her Government.

Shougang International Trade & Engineering and Citic Pacific were reportedly pondering whether to continue investing in Australia or not.

Both groups, which have invested heavily in Australia's resources sector, expressed their concerns at a UBS roadshow in China last week, The Australian reported.

UBS analysts present on the roadshow quoted Zhu Liangliang, Shougang International Trade & Engineering director, as saying he was "deterred by evoking tax regime in Australia." Shougang Corporation has interests in iron ore miner Mount Gibson Iron.

Citic Pacific project manager Teng Tao said Citic was "no longer looking in Australia" for assets. Its $US5.2 billion ($AUD5.1) billion Sino Iron mine in the Pilbara has been subject to cost overruns and delays, along with disputes with the mine's primary contractor, China Metallurgical Group.

Citic had "clearly been frustrated in its pursuit of offshore iron ore and coal assets," UBS analysts said.

Approved in 2006, the Sino Iron mine was a joint venture with billionaire Clive Palmer. Project completion is expected next year, however its first production had originally been targeted middle of last year.

Aside from Macarthur Coal, where it is a foundation investor, Citic also has interests in South Australian group Marathon Resources, which it owns 17.12 per cent. Irish company Mount Kellett Capital Partners owns 18.9 per cent. Citic is presently embroiled in a legal action against the South Australian government on a decision banning mining activities at Arkaroola. Last month before stepping down, former SA premier Mike Rann introduced laws permanently prohibiting mining in the region. Marathon said there was no proper consultation with private mining firms before the state government implemented the decision.