* Andrew Burrell * From: The Australian * September 15, 2011 12:00AM
ASIC probe rocks local miners
Picture: Jane Dempster Source: The Australian
CHINESE investor Hanlong Mining's $1.3 billion takeover bid for Sundance Resources is likely to be reassessed by Beijing's chief economic policy-making body after three of the foreign group's Sydney-based executives were stood down amid a probe into alleged insider trading.
Sources confirmed yesterday that the negotiations between Hanlong and Sundance would continue. However, it is understood China's National Development and Reform Commission, which vets all Chinese foreign investment, is aware of the allegations and this could sway any decision on whether rival entities will be permitted to sweeten the offer for Sundance of 50c a share, which is 12c above yesterday's closing price.
The Australian Securities & Investments Commission revealed on Tuesday that it was investigating Hanlong Mining managing director Steven Hui Xiao, the company's vice-president, Calvin Zhu, and another employee, Fan Zhang, for alleged insider trading.
ASIC is investigating whether the trio, along with two others, used inside knowledge of Hanlong's plans to take over Sundance and fellow Perth-based miner Bannerman Resources to make almost $2 million in profits.
The regulator has obtained freezing orders against the Hanlong executives, as well as Mr Xiao's wife, Xike Hu, another woman called FanFan Chen and Wingatta Pty, which it said was an entity associated with Mr Zhang.
Even though it is privately owned, Hanlong Mining's parent company, Sichuan Hanlong Group, was required to seek approval from the NDRC to take an initial 19 per cent stake in Sundance and to pursue the full takeover bid it unveiled in July.
Hanlong would also require approval from Australia's Foreign Investment Review Board to take over Sundance, although it is unclear whether the allegations against the group's key executives in Australia would influence such a decision.
"China is deeply embarrassed about this," said a source close to one of the transactions.
"The NDRC would not be impressed."
Another source close to the talks said just as the arrest of Rio Tinto's Stern Hu in China in 2008 had not shut down the mining giant's operations in China, the alleged actions of Hanlong employees in Australia should not affect its investment plans.
Both Sundance and Bannerman Resources are seeking talks with Sichuan Hanlong Group vice-president Kang Huan Jun, who was due to arrive in Sydney yesterday after being sent from China to deal with the crisis.
Bannerman chief financial officer Peter Kerr said he hoped to talk to Mr Jun, but in the meantime it was "business as usual" in regard to Hanlong's $144m takeover offer for the Africa-focused miner.
Fosters Stockbroking analysts said the ASIC investigation was unlikely to affect negotiations, but it rated the likelihood of a "sweetener" to the offer from Hanlong or a knockout bid from another Chinese major as "high".
"The board of (Sundance) has previously stated that Hanlong's initial bid . . . did not represent fair value, but that the board would negotiate with Hanlong to see if they could mutually agree on a revised offer," the firm said.
"We expect Hanlong to propose a sweetener . . . and also understand that there are many suitors in the wings."
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