wall street journal chinese bailout for mgx

Seems like more traders across the global read the WSJ than the Fin Review. They know a good arbitrage op when they see one IMO.

Chinese Bailout Approved for Mount Gibson Iron

* DECEMBER 17, 2008, 1:25 P.M. ET

By ALEX WILSON

MELBOURNE, Australia -- The federal government approved a bailout package for Mount Gibson Iron Ltd. by China's Shougang Corp. and APAC Resources Ltd., a move some analysts see as another signal of a new openness to Chinese investment in the country's key mining sector.

Chinese entities are back investing in the Australian mining sector and, with other sources of funding drying up, analysts said there was a recognition in Australia that China is set to play an even more important role in bankrolling local projects.

Mount Gibson said Wednesday that Australia's Foreign Investment Review Board has approved the bailout transaction, which consists of a share placement and rights issue to raise 162.5 million Australian dollars (US$113.4 million).

APAC and Shougang are also stepping in to purchase iron-ore shipments after other customers defaulted on long-term contracts, throwing a lifeline to Mount Gibson by securing its revenue at a time of sagging demand.

APAC and Shougang are underwriting the rights issue and are expected to take up most, if not all, of the stock. Together with the share placement, this is likely to see their stake in Mount Gibson rise to as much as 40.6%.

Earlier this year, there was uncertainty over the Australian government's attitude to Chinese government-backed investment in the mining sector, with Chinese applications to the board stalling, and Australian Treasurer Wayne Swan vowing to closely scrutinize deals where the buyer was also an end user.

With credit markets frozen and turmoil on share markets making equity raising for miners difficult, analysts said the government is likely to give a warmer welcome to Chinese investment.

"When faced with the option of having no one or someone willing to put up equity in a company that's on the brink, I think they are going to take the somebody," said one analyst.

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