Cheung Kong Infrastructure Holdings' (CKI) plan to take over an iron sands mining business in New Zealand for NZ$250 million (HK$1.13 billion) collapsed yesterday, a victim of the global financial crisis. The New Zealand government, whose Overseas Investment Office had to approve the deal, declined to give its consent. It also said that CKI found its planned expansion of the mining business - which consists of an iron sands mine on the west coast of North Island - was 'no longer viable' as demand declined and economic conditions deteriorated. 'Given the reduced demand for the output of the mine and the deteriorating global economic conditions, CKI has come to the decision that plans to expand the business are no longer viable,' the government said in its decision. The failure of the bid was welcomed by an analyst with a European brokerage. 'Obviously, the company is better off not completing the deal as it hasn't paid the consideration yet and a looming global recession raises questions about demand,' the analyst said. 'From the very beginning, investors in CKI were not convinced of its plan to diversify into volatile commodities.' The news sent shares of CKI - an energy utility and toll road operator - down 55 HK cents or 1.85 per cent to HK$29.25, bucking a 2.18 per cent gain in the Hang Seng Index. CKI said it would continue to look for investment opportunities in New Zealand and other markets. However, vendor BlueScope Steel, Australia's largest steelmaker and controlling shareholder of New Zealand Steel, which operates the mining business, said it was evaluating its legal position on CKI's decision to scrap the sale and purchase agreement. Under the agreement, CKI said it would buy the Taharoa Iron Sands Business on the west coast of North Island. Iron sands are a key source of titanomagnetite iron ore used as a raw material in making iron. Some analysts said that a rapid and sharp decline in commodity prices and currency exchange rates had prompted CKI to walk away from the deal. Since the deal was signed on August 26, the New Zealand dollar has depreciated against the US dollar by about 20 per cent, which means the purchase price shrank from HK$1.4 billion, to HK$1.1 billion yesterday. However, volatile foreign exchange markets also fuelled risks in the mining business, which primarily exports to China and Japan. In addition, commodities prices - particularly for crude oil and iron ore - have slumped since the middle of September on fears the global economy will slip into recession as the financial crisis continues. Some analysts said CKI would have to increase its acquisition efforts since associate Hongkong Electric Holdings would see its returns on regulated power supply in Hong Kong cut by as much as 25 per cent next year. Hongkong Electric, a supplier of power to Hong Kong and Lamma islands, is allowed to earn a maximum 9.99 per cent return on fixed assets in use under a new scheme of control on January 1. An analyst at another European brokerage estimated that Hongkong Electric's profit would shrink to HK$5.8 billion next year, from HK$7.7 billion this year. Last year's net profit was HK$7.45 billion. The company will cut tariffs by an average 5.9 per cent next year.