approved, thanks swan

Treasurer approves Fortescue Valin deal

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Treasurer approves Fortescue Valin deal 5:15 PM


Federal Treasurer Wayne Swan has approved an investment of up to 17.55 per cent in Fortescue Metals Group Ltd, Australia's third biggest iron ore producer, by China's Hunan Valin Iron and Steel Group.

"Today, I approve the application by Hunan Valin Iron and Steel Group for up to a 17.55 per cent shareholding in Fortescue Metals Group, subject to the formal and strict undertakings I have sought from Hunan Valin, and which have also been agreed to by Fortescue Metals Group," Mr Swan said in a statement.

Under the deal - which will raise funds for the next expansion phase of Fortescue's iron ore operations in the Pilbara in Western Australia - mining magnate Andrew Forrest will sell part of his stake in the company.

Mr Swan said the Chinese steelmaker would have to report to the Foreign Investment Review Board (FIRB) on various undertakings concerning its board membership.

They included that any director appointed to the Fortescue board by Valin comply with the company's directors code of conduct; that any director Valin nominates declare any conflicts of interest regarding marketing, sales, customer profiles, price-setting and cost structures; and that any Valin-appointed Fortescue director comply with information segregation arrangements between the two companies.

"These undertakings ensure consistency with Australia’s national interest principles for investments by foreign government entities, which I set out in February 2008," Mr Swan said in a statement after the market had closed.

"They ensure the appropriate separation of Fortescue’s commercial operations and customer interests, and support the market-based development of Australia’s resources."

Mr Swan said the approval was subject to Valin holding no more than a 17.55 per cent stake in the company.

Under the proposal, Fortescue will issue new shares to Valin and Valin also plans to acquire shares from other shareholders. Fortescue shares rose 2.4 per cent today to $2.55.

Mr Swan is also considering a $US19.5 billion deal between Rio Tinto Ltd and China's Chinalco, that could give the Chinese aluminium giant an up to 18 per cent stake in the global miner.

On Friday, Mr Swan blocked a takeover by China's Minmetals of OZ Minerals Ltd, Australia's third biggest diversified miner, on security grounds, as the company's flagship Prominent Hill mine in South Australia was situated within the defence-sensitive Woomera weapons testing area.

OZ Minerals said today it had received a new takeover bid from Minmetals that excluded Prominent Hill. The company, which is also in talks with its lenders to renegotiate the repayment of about $1.3 billion in debt, asked for trading of its shares to be suspended. It expects to make an announcement on the status of both the bid and its debt situation before trading begins tomorrow.