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Monday 8 June 2009
China may shun Australia deals after Rio saga
China may question the wisdom of investing in Australian resources after Rio Tinto last week spurned a multi-billion-dollar link-up for a joint venture with bitter rival BHP Billiton, analysts say.
Reports say Minmetals deal with OZ Minerals also under threat
AFP 8 June 2009
(SYDNEY) China may question the wisdom of investing in Australian resources after Rio Tinto last week spurned a multi-billion-dollar link-up for a joint venture with bitter rival BHP Billiton, analysts say.
Rio hailed Chinalco - Beijing’s wholly owned aluminium manufacturer - as a white knight when it offered US$19.5 billion for an increased stake in the debt- laden miner last February, while the global slump was at its worst.
Yet as soon as commodities markets picked up, Rio dumped Chinalco and cut a deal with BHP to create an iron ore joint venture in Western Australia’s Pilbara region worth an estimated A$140 billion (S$161 billion).
The deal, announced last Friday, will see Rio receive US$5.8 billion from BHP for the Pilbara joint venture and separately raise US$15.2 billion through a rights issue.
Bell Potter Securities client adviser Chris Kimber said China would be seething at missing out on a deal it viewed as an important part of its goal to guarantee long-term resource supplies.
‘They’re going to find this very frustrating because the reason they bid for Rio in the first place was because they were worried about their supply,’ he said. ‘This is going to put them back in exactly the same position they were in before.’
China also faced a bruising campaign against its Rio bid from Australian rights activists and some politicians that used evocative images such as the Tiananmen crackdown to oppose selling assets to a ‘brutal military regime’.
Also, reports say Beijing may see another deal go sour if miner OZ Minerals accepts a last-minute recapitalisation proposal rather than proceed with a plan to sell most of its assets to China’s Minmetals.
Little wonder that West Australian Premier Colin Barnett said China felt ‘unwelcome and unloved’ in Australia at the moment.
Mr. Barnett, whose massive state includes the Pilbara and other major resource assets, said he would visit China next month in a bid to reassure its leaders that their investment remained welcome in Australia.
‘We have got a very, very messy situation on our hands with China right now,’ he told Perth’s Sunday Times newspaper. ‘I’m going to China next month and I expect it to be a very difficult visit now.’
‘China was basically a white knight to try to help Rio Tinto, now they have been rejected . . . I would imagine China right now is feeling slighted about their relationship with Australia.’
Australia China Business Council spokesman Duncan Calder said officials in Beijing would be closely examining how their counterparts in Canberra had acted.
Australian officials deferred a decision on Chinalco’s bid for three months last March, a delay Mr. Calder said proved crucial because it coincided with recovering commodities markets. ‘Beijing may have some disincentive views and some disappointment with the Australian government over delays in the (investment review) process, which may be seen to have allowed this deal to have collapsed,’ he told public radio.
The Australian newspaper has reported that government officials urged Rio to consider alternatives to Chinalco’s offer, which was looming as a potential political headache.
However, Prime Minister Kevin Rudd said Australia remained a country that welcomed all foreign investment, Chinese included.
‘Our policy on foreign investment in Australia is non-discriminatory, our policy on foreign investment in Australia is open and welcome,’ he said.
‘But consistent with all previous Australian governments, we will make judgements in the national interest.
‘What’s occurred most recently is entirely a commercial matter between Rio on the one hand and Chinalco on the other - that’s the truth of it.’
1 comment:
China may shun Australia deals after Rio saga
Reports say Minmetals deal with OZ Minerals also under threat
AFP
8 June 2009
(SYDNEY) China may question the wisdom of investing in Australian resources after Rio Tinto last week spurned a multi-billion-dollar link-up for a joint venture with bitter rival BHP Billiton, analysts say.
Rio hailed Chinalco - Beijing’s wholly owned aluminium manufacturer - as a white knight when it offered US$19.5 billion for an increased stake in the debt- laden miner last February, while the global slump was at its worst.
Yet as soon as commodities markets picked up, Rio dumped Chinalco and cut a deal with BHP to create an iron ore joint venture in Western Australia’s Pilbara region worth an estimated A$140 billion (S$161 billion).
The deal, announced last Friday, will see Rio receive US$5.8 billion from BHP for the Pilbara joint venture and separately raise US$15.2 billion through a rights issue.
Bell Potter Securities client adviser Chris Kimber said China would be seething at missing out on a deal it viewed as an important part of its goal to guarantee long-term resource supplies.
‘They’re going to find this very frustrating because the reason they bid for Rio in the first place was because they were worried about their supply,’ he said. ‘This is going to put them back in exactly the same position they were in before.’
China also faced a bruising campaign against its Rio bid from Australian rights activists and some politicians that used evocative images such as the Tiananmen crackdown to oppose selling assets to a ‘brutal military regime’.
Also, reports say Beijing may see another deal go sour if miner OZ Minerals accepts a last-minute recapitalisation proposal rather than proceed with a plan to sell most of its assets to China’s Minmetals.
Little wonder that West Australian Premier Colin Barnett said China felt ‘unwelcome and unloved’ in Australia at the moment.
Mr. Barnett, whose massive state includes the Pilbara and other major resource assets, said he would visit China next month in a bid to reassure its leaders that their investment remained welcome in Australia.
‘We have got a very, very messy situation on our hands with China right now,’ he told Perth’s Sunday Times newspaper. ‘I’m going to China next month and I expect it to be a very difficult visit now.’
‘China was basically a white knight to try to help Rio Tinto, now they have been rejected . . . I would imagine China right now is feeling slighted about their relationship with Australia.’
Australia China Business Council spokesman Duncan Calder said officials in Beijing would be closely examining how their counterparts in Canberra had acted.
Australian officials deferred a decision on Chinalco’s bid for three months last March, a delay Mr. Calder said proved crucial because it coincided with recovering commodities markets. ‘Beijing may have some disincentive views and some disappointment with the Australian government over delays in the (investment review) process, which may be seen to have allowed this deal to have collapsed,’ he told public radio.
The Australian newspaper has reported that government officials urged Rio to consider alternatives to Chinalco’s offer, which was looming as a potential political headache.
However, Prime Minister Kevin Rudd said Australia remained a country that welcomed all foreign investment, Chinese included.
‘Our policy on foreign investment in Australia is non-discriminatory, our policy on foreign investment in Australia is open and welcome,’ he said.
‘But consistent with all previous Australian governments, we will make judgements in the national interest.
‘What’s occurred most recently is entirely a commercial matter between Rio on the one hand and Chinalco on the other - that’s the truth of it.’
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