A valid and interesting question. I think the answer lies in the...

A valid and interesting question. I think the answer lies in the fact that IMHO it's not ownership of Husab that's at stake here, it's control. I believe that the Chinese think control is simply a matter of vacuuming up the most stock they can in either company to achieve this. You wouldn't go around telling the Nab govt they can have 10% of something unless you were fairly confident of having enough stock to do it, which would be 60% plus of EXT. They can do this by vacuuming up all the non-RIO held shares in both companies. Even if they don't get RIO's shares in KAH, but get the rest, they will trigger the ASIC downstream rules by achieving an effective 20% plus stake in EXT.

I still believe that RIO is the natural owner of Husab, and the entity best able to acquire EXT outright. The fact that they have not yet made a move would suggest that they do not want to get CGNPC offside and this might mean a JV has been discussed between them. However, if we are to benefit from an auction it makes sense that RIO or anyone else interested would wait until a FORMAL offer is made that establishes the starting price.

Once this is established, RIO could move quickly for $3-4 billion and mop the whole thing up.

Either way, I think the first event will be the triggering of ASIC rules for a downstream bid for EXT once they Chinese get past sufficient ownership of KAH to do it (assuming they formalise a bid). The good thing for us is that ultimately all we want, whether we are selling into a bid or holding for production, is a re rating of the SP to reflect fair value.