what more can one say?

China iron ore investment approved
19-November-09 by AAP

Australian regulators have allowed a Chinese state-owned company to take up to a $40 million stake in a South Australian magnetite joint venture.

The stake will give Baotou Iron and Steel up to 50 per cent of a proposed joint venture with Centrex Metals Ltd to develop the Bungalow magnetite deposit.

Centrex revealed the decision of the Foreign Investment Review Board (FIRB) in a statement to the stock exchange on Thursday.

Under the deal Baotou, China's tenth biggest steel producer, will pay $8 million towards exploration and study of the site for a 10 per cent interest.

Another $8 million will go to a second round of exploration and $24 million will be spent on the the final phase, to complete a bankable feasibility study.

After all three phases are complete, Baotou will have a 50 per cent stake in the joint venture.

Adviser with Bell Potter Securities, Chris Kimber, said the deal was unusual because the Chinese company would have a 50 per cent stake in the joint venture, which would appear at odds with government guidelines.

Federal government guidelines are that Chinese companies should limit their investments in Australia to 15 per cent of existing listed companies and less than 50 per cent of greenfields projects.

"It looks odd, because that would seem to break the spirit of the agreement, and yet they have approved it," Mr Kimber said.

A spokesman for Centrex said the investment was only in the single project.

"It is only that single Bungalow mineralisation. It is a 50 per cent interest in that project," he said.

The Chinese company already holds about an 8.3 per cent stake in Centrex, the second largest shareholder.

Centrex will receive a further $2.26 million for exploration expenses incurred since signing the deal agreement on September 20.

Chairman of Centrex, David Lindh, said the FIRB approval was a "significant milestone" for his company.

The Bungalow deposit is near Cowell in South Australia, about 100 kilometres south of Whyalla.

Shares in Centrex closed up one cent at 73 cents.