Baosteel launches joint bid for Australian miner

Chinese steel giant Baosteel Resources and an Australian partner launched a A$1.14 billion (HK$8.1 billion) takeover bid for explorer Aquila Resources in a move that could help break the grip of mega iron ore exporters Rio Tinto and BHP Billiton.

The unsolicited offer to take over Aquila could open up a new Australian iron ore export region to supply Asian steelmakers, by jump-starting the US$7 billion West Pilbara Iron Ore project, half-owned by Aquila.

State-owned Baosteel's move would be the biggest foray into an undeveloped iron ore project in Australia by a Chinese investor since Citic Pacific's US$10 billion Sino Iron project, which began producing last year after massive cost overruns and delays.

Baosteel, which already has a 20 per cent stake in Aquila, said it first invested in the firm in 2009 to help it fund the iron ore project and a separate coking coal mine.

"But after five years we haven't seen any projects being started. So we have been very patient, but we've become frustrated," chief financial officer Wu Yiming said.

Baosteel, China's No 2 steelmaker, and rail company Aurizon said they would offer A$3.40 cash per share, a 39 per cent premium to Aquila's close on Friday. The stock closed at A$3.34 yesterday.