china puts brakes on hunan bid, page-2

SYDNEY, April 15 (Reuters) -

Fortescue Metals Group Ltd (FMG.AX),

Australia's third-largest iron ore miner, expects China's Hunan Valin Steel to gain Chinese government approval this month to take a 17 percent stake in the miner.
A company spokesman on Wednesday dismissed a report on the Sydney Morning Herald newspaper's Website which said that China's top economic planning agency was withholding approval of the $438 million deal because of concerns over Australia's handling of it.

The deal has received Australian government approval, with conditions, amid a storm of political protest in Australia over investment by state-owned Chinese firms in the country's resources industry -- a key driver of the economy.

"Fortescue remains of the view that the Valin investment in the company will proceed," said the spokesman, adding that Fortescue was not aware of any reason why the deal would not be approved by China's National Development and Reform Commission (NDRC).

The Herald report, by a China-based columnist, said the NDRC was withholding approval amid concerns that Australia's Foreign Investment Review Board had imposed overly onerous conditions.

The conditions were imposed to ensure that the directors of Hunan Valin appointed to the Fortescue board could not use pricing information against the Australian company in iron ore contract negotiations.

The report said unspecified Chinese media and observers in Beijing have reported NDRC officials were worried the conditions set an unfavourable precedent that may fetter other Chinese investments, particularly state-owned aluminium maker Chinalco's $19.5 billion tie-up with Rio Tinto (RIO.AX) (RIO.L).

The Australian government is yet to approve that deal.

An analyst, who did not wish to be identified, said if China attempted to use concerns about the Hunan Valin investment as a way to make conditions on the Chinalco deal less onerous, it would only highlight any concerns Australian authorities might have over undue Chinese government influence. ($1=1.376 Australian Dollar)