Baosteel cleared to take 15pc holding in Aquila
The Australian government has given approval for China's largest steel group, Baosteel Group, to invest US$285.6 million for a 15 per cent stake in Aquila Resources, a small Australian iron ore and coal miner.
This follows the decision last week to allow Yanzhou Coal Mining's US$3.54 billion takeover of Felix Resources, an Australian coal miner.
The two decisions allowing investment from two Chinese state-controlled companies is an indication that Australia is coming to terms with the onslaught of mainland investment that has been circling around its resource companies.
China is cash-rich but needs resources while Australia has the resources but many of its companies need capital to develop their projects.
One of the conditions of the deal is that Baosteel will assist Aquila in sourcing low-cost financing from Chinese institutions to underpin development of its projects.
The high level of Chinese interest in Australian companies triggered a public debate amid fears that Australia was in danger of losing control over its resources.
Last month, Patrick Colmer, the head of Australia's Foreign and Investment Review Board, said the board preferred foreign investors to take no more than a 15 per cent stake in mining projects and no more than 49 per cent in companies in other sectors.
Relations between Australia and China dipped sharply following the failure by Aluminum Corp of China, the country's biggest aluminium producer, to secure a stake in mining giant Rio Tinto earlier this year and China's arrest in August of Rio executive Stern Hu for allegedly bribing mainland steel mill executives.
Aquila is based in Perth in Western Australia and has large projects of coal, iron ore, manganese in Queensland, Western Australia and South Africa.
Aquila's deal with Baosteel and the access to low-cost funds will enable the miner to expand two key projects, the West Pilbara Iron Ore Project in Western Australia and the Eagle Downs Coal Project in Queensland.