Treasurer Scott Morrison faces a tough decision over whether to allow controversial Chinese investor Hanlong to acquire another Australian mining company, after a controlled subsidiary of the group lodged a takeover offer for a local bauxite aspirant.
Several Hanlong executives were jailed for insider trading in recent years, after the company made takeover bids for both uranium junior Bannerman Resources and iron ore aspirant Sundance Resources in 2011.
Hanlong was unable to secure the finance for either takeover, and the Australian Securities and Investment Commission has alleged in recent insider trading cases that the Bannerman offer was lobbed solely to drive its share price higher.
The new takeover has been lobbed by ASX-listed Moly Mines, which is 53 per cent owned by Hanlong and has been suspended from trading on the ASX since April 2014.
Moly has made an offer to acquire unlisted bauxite developer Gulf Alumina, which is seeking to build a bauxite export business on Cape York Peninsula, just north of Rio Tinto's bauxite export operations at Weipa.
Under the offer, Gulf shareholders would receive 46¢ for every share they own, plus 1.4 options to buy shares in Moly once its shares resume trading on the ASX.
With China importing more bauxite than in previous years, Moly said it was keen to gain exposure to the bauxite sector.
"There is growing demand for seaborne bauxite in China as local resources are depleted. Moly believes that Gulf is well positioned to take advantage of this increased demand especially in light of recent bans on the DSO exports from Malaysia, Indonesia and the Philippines," the company said in a statement.
Crucially, the deal is subject to approval by the Foreign Investment Review Board, which falls under Mr Morrison's Treasury portfolio.
It is also subject to the ASX allowing Moly shares to resume trading.
The directors of Gulf have urged shareholders to accept the offer, and more than 55 per cent of the register has promised to accept the offer in the absence of a superior proposal.
It is the second time this year that a suitor has tried to acquire Gulf, after ASX-listed Metro Mining made unsuccessful offers to Gulf's owners in 2015 and earlier this year.
Metro's takeover bids saw the company acquire 39 per cent of Gulf shares, and the spurned acquirer is now, ironically, Gulf's biggest shareholder.
Metro hinted at the FIRB process in a statement.
"The proposed transaction is subject to many conditions, some of which may be very difficult to satisfy," the company said.
Metro did not indicate whether it would make a rival bid for Gulf, but said in a statement that it "remained open to bringing about the logical combination of Metro and Gulf's projects".
Moly hopes the transaction can be completed before Christmas.
The multiple bids for Gulf highlights the increased investor interest in seaborne bauxite.
With declining supplies of the commodity inside China, the middle kingdom's huge aluminium industry is being forced to import more bauxite from nations like Australia, Brazil and the Republic of Guinea.
Rio Tinto announced plans last year to spend $US1.9 billion to expand its exports from Weipa, while Alcoa and Alumina Ltd have started exporting bauxite from Western Australia.
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