Treasurer Wayne Swan and the Foreign Investment Review Board (FIRB) have approved the application by China’s Hunan Valin Iron and Steel to buy up to 17.55% of Fortescue Metals.
“This is a great result for Fortescue, Valin and the Australian and Chinese economies,” Fortescue CEO Andrew Forrest said.
“China now has an investment in a great Australian company and Fortescue has a strong investor which is determined to see the company grow and prosper.”
The $1.2 billion deal is subject to “formal and strict undertakings” in relation to the board seat Fortescue has allotted for the chairman of Valin.
The conditions include the Valin nominee submitting indications of any potential conflicts of interest when the companies are negotiating resource prices.
The investment will ultimately see Valin with a 17.4% stake in the Perth-based miner.
The FIRB’s initial review period for the deal was extended by 30 days, raising fear over whether or not it would be approved.
Last week, Swan blocked Minmetals $2.6 billion takeover of OZ Minerals on grounds of ‘national security’.
The fact that the deal was for only a portion of an Australian company may have helped its authorisation, resource analyst James Wilson of DJ & Carmichael told MINING DAILY.
“When you consider that FIRB is looking at aspects such as strategic national interest and creating a monopoly, a 17.4% stake in Fortescue is not earth shattering,” he said.
“There is no monopoly.”
Forrest believes the deal is a positive step in the relationship between Australian and Chinese industries.
“Today’s Commonwealth Government approval enhances the already strong relationship between Australia and China,” he said.
“Fortescue has always enjoyed close and mutually rewarding relationships with Chinese companies and Valin’s investment in Fortescue exemplifies and rewards the co-operative approach we have taken.”