Mid June Shipment, page-52

Hi Moorookamick

Above you said the following:

• "While IMA owns the land, any takeover deal could exclude ownership of the land (just mining tenement rights and company assets) which would take the FIRB cap to $1.154 billion as a non-sensitive business by a FTA partner. We have a FTA agreement with China."

I have to say the Foreign Acquisitions and Takeovers Act 1975 and the Foreign Acquisitions and Takeovers Regulations 2015 - the legislation that governs foreign investment regulation in Australia - is a complex beast. This legislation can be found here https://www.legislation.gov.au/

In practice, very few transactions benefit from the Free Trade Agreements (FTAs) in place with some countries including China. The reason for this is that there can be no interposed entity between the company in the country of the ultimate owner and the entity or asset being acquired in Australia (see regulation 7 of the Foreign Acquisitions and Takeovers Regulation 2015). In practice, there is nearly always (very close to 100 per cent) an interposed entity. I would say it is certain that if a foreigner seeks to takeover IMA, they will establish an Australian company (known as a special purpose vehicle) to make the acquisition. This means that the acquisition does not benefit from the FTA. I also note that in the case of land acquisitions involving mining and production tenements, only companies based in Chile, New Zealand and United States making the acquisition (and if there is no interposed entity in another country than the origin of the acquirer) potentially benefit from the higher threshold of $1,154 million.

In addition, for the purposes of the Foreign Acquisitions and Takeovers Act 1975, "foreign government investors (FGIs) " do not benefit from the FTAs and the monetary threshold for FGIs is $0 for all land acquisitions. In simple terms, a FGI is where a Govt has a 20 per cent or more interest in the acquirer. Many Chinese entities satisfy this test. Also many pension funds in the United States also satisfy this test. I think you be surprised how many entities are considered to be an FGI under the Foreign Acquisitions and Takeovers Act 1975.

I also like to note that under the Foreign Acquisitions and Takeovers Act 1975, "Australian land" means "agricultural land, commercial land, residential land or a mining or production tenement" (see section 4). These types of land are all defined terms under the Act. And the value of the mining or production tenement includes all the plant and equipment on the tenement. So IMA is certainly considered to be an "Australian Land Corporation" for the purposes of the Foreign Acquisitions and Takeovers Act 1975 (as more than 50 per cent of its assets are what is considered to be a mining or production tenement) and the threshold that applies in this case is $0 (with the only possible exception where the ultimate owner is from Chile, New Zealand or the United States and they are not a FGI and there is no interposed entity between the acquirer and the target).

I hope this explanation makes sense.