Shougang Concord International Enterprises, a unit of mainland steelmaker Shougang Corp, has scrapped the proposed purchase of 19.73 per cent of Australian iron ore miner Mount Gibson Iron after the deal was rejected by the Australian regulators. Australia's Takeover Panel, which governs mergers and acquisitions, said in a statement yesterday that the acquisition attempt by Shougang Concord showed that it was contriving with another of its parent's subsidiaries, Apac Resources, to gain control of Mount Gibson. The move was found to be in violation of Australia's corporate code. Shougang Holding (Hong Kong), a wholly owned subsidiary of Shougang Corp, owns 40.71 per cent of Shougang Concord and 18.05 per cent of Apac Resources. Apac, which controls 20.22 per cent of Mount Gibson, is the iron ore miner's largest shareholder. In January, Shougang Concord bought 156.8 million Mount Gibson shares, representing a 19.73 per cent stake, from Russia's Metalloinvest for A$408 million (HK$2.91 billion) or A$2.60 a share. The Mount Gibson deal raised eyebrows within the financial community. 'Shougang went in believing they could get away with it, but Mount Gibson had a good defence; they uncovered the association and made a compelling case,' a market observer said. Shougang Concord said in a statement to the Hong Kong stock exchange yesterday that the transaction had been cancelled. The company did not indicate what its next move would be, but some observers said the company might attempt a full takeover. The rejection marks another setback for aggressive mainland steel firms in Australia as they rush to secure overseas metal and energy reserves. Sinosteel's offer to buy Midwest was rejected by the Australian iron ore firm's board, prompting the mainland steelmaker to launch a A$954 million hostile takeover bid last month. The company plans to spend the next two weeks meeting Midwest shareholders to gauge interest. Earlier this year, Aluminum Corp of China launched a raid on shares of Rio Tinto, the world's second-largest miner, spending US$14.05 billion for a 9 per cent stake in a matter of hours. The move was aimed at thwarting BHP Billiton's bid to take over Rio. China and other iron ore dependent countries fear the monopolistic pricing practices a merged BHP-Rio could employ. 'In the Middle Ages, you rolled an army in and took over natural resources. Now it's done through the stock market,' a banker said.