Sarah-Jane Tasker | July 14, 2009 Article from: The Australian BILLIONAIRE Clive Palmer's iron ore hope Australasian Resources remains locked in protracted funding talks with its Chinese partner -- which is involved in the dramatic arrest of Rio Tinto's China staff.
Australasian Resources shares remain suspended as the Perth-based miner continues to negotiate with Shougang, China's fourth-largest steelmaker, about the Susan Palmer Deposit project agreement.
Mr Palmer, who has a 66 per cent interest in the company, weighed into the funding talks last week after a June 30 deadline passed.
Shougang has a 6.33 per cent stake in ARH and a strategic alliance to develop its flagship iron ore project in the Pilbara region of Western Australia.
The state-owned entity has been caught up in the dramatic arrest of four Rio Tinto staff -- including Australian national Stern Hu -- with Chinese state media reporting that Shougang's head of iron ore purchases, Tan Yixin, allegedly provided production data to Rio. Chinese authorities claim Mr Hu and his colleagues were involved in bribery and espionage during the contentious iron ore negotiations. Rio says it is "surprised and concerned" by the arrests.
Investors are expected to be wary of Rio and its iron ore joint venture partner BHP Billiton while the diplomatic drama unfolds.
Pengana Capital fund manager Tim Schroeders said the nature of the charges was unclear.
"While those doubts linger, investors will probably stay on the sidelines
with respect to Rio and it may continue to underperform in the short term,"
he said.
"With the current status quo of what is going on at the moment it will increase doubt among investors and players in the industry about where Rio Tinto is positioned now and what their future position will be."
Albert Landman, of Tricom Equities, said investors had viewed China positively, but the arrest of Mr Hu was a reality check. "It puts everybody on a little bit of notice. What does this mean? Are the rules of the game changing in front of our eyes?" he said.
Mr Schroeders said it was too early to say what effect the arrests would have on Rio's ability to do business in China.
"At the moment, it seems to be quarantined at an individual level. We are not really seeing the Chinese government coming out and taking Rio Tinto to task as a corporation," he said.
"But there is a lot more to be unearthed before we can say that Rio is in the clear. Longer term, they should be fine to do business in China, as senior executives such as (iron ore boss) Sam Walsh are very highly respected globally and in China. Worst-case scenario will be they will have to put in a new team as far as negotiations go."
ARH Price at posting:
54.0¢ Sentiment: None Disclosure: Held
