Australia Blocks China Minmetals’s Purchase

HONG KONG — Citing national security, Australia blocked on Friday one of several acquisitions China is seeking in the country’s natural resources sector, a move that may stoke concerns about rising protectionist tendencies around the globe.

The decision to block the purchase of OZ Minerals, a mining company, by state-owned China Minmetals Corporation, coincides with a heated debate concerning a much larger investment that the Chinese metals company Chinalco is planning to make in the British-Australian mining group Rio Tinto.

Two weeks ago, Chinese antitrust authorities blocked a move by Coca-Cola to take over Huiyuan Juice Group, a Chinese juice manufacturer, for $2.4 billion — a decision that caused widespread concern about China’s attitude to foreign takeovers of local companies.

Australia’s treasurer, Wayne Swan, said on Friday that he decided to block the OZ Minerals transaction because the company’s Prominent Hill gold and copper mine, its core asset, is near a sensitive military facility.

“The government has determined that Minmetals’ proposal for OZ Minerals cannot be approved if it includes Prominent Hill,” Mr. Swan said in a statement.

He added that discussions were continuing “in relation to OZ Minerals’ other businesses and assets, and the government is willing to consider alternative proposals relating to those other assets and businesses.”

The chief executive of OZ Minerals, Andrew Michelmore, said the company and Minmetals were discussing potential changes to the deal and would make an announcement “as soon as possible.”

Battered by falling earnings as raw materials have plunged in line with the slowing global economy, both OZ Minerals and Rio urgently need the cash injection that the Chinese companies’ investments represent.

OZ Minerals is scheduled to repay more than $900 million in debt next week, and must now renegotiate the deal or obtain a loan extension.

Analysts on Friday said it was unclear whether Minmetals would proceed without Prominent Hill, which is considered a core asset.

In a statement issued in Australia, Minmetals said Friday it wanted to continue talks: “Our focus is on delivering an agreed solution to OZ Minerals that meets national interests, can satisfy lenders, deliver stability to employees and protect existing operations.”

Whatever happens, Friday’s announcement will fuel the debate about a rise in global protectionism — even if Canberra’s rejection was due to security concerns rather than business protectionism.

A recent flurry of bids for some of Australia’s most prized natural resource assets has caused public and political unease in the country, as well as, in the case of the proposed Chinalco transaction with Rio, angry protests from shareholders.

At the same time, however, China is the main buyer of the natural resources that form the bedrock of Australia’s economy, making the approval of such deals politically sensitive.

Chinalco, or Aluminum Corporation of China, as it is officially known, last month proposed investing $19.5 billion in the miner. That deal, currently being evaluated by Australia’s antitrust authorities, would be the biggest foreign investment to date by a Chinese company and increase its leverage in pricing negotiations for iron ore from Rio’s mines.

The attempted OZ Minerals takeover, and a separate bid by the Chinese steel manufacturer Hunan Valin Iron for a 17.5 percent stake in Fortescue Metals Group, another Australian company, are much smaller — $1.7 billion in the case of OZ Minerals.

But all three transactions, each announced in the last few months, reveal China’s desire to take advantage of the recent drop in commodities prices to secure its hold over natural resources.


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