Australia delays ruling on Chinese bid for Lynas

Sept. 3, 2009

FURTHER STRAIN ON CHINA-AUSTRALIA RELATIONS

Australia's Foreign Investment Review Board now has until October to review, State-owned China Nonferrous Metal Mining group's bid for the rare earth miner with operations in W. Australia.

Posted: Thursday , 03 Sep 2009

SYDNEY (Reuters) - Australia has again delayed a decision on a Chinese state-owned firm's proposed bid for rare-earths miner Lynas Corp Ltd (LYC.AX), a deal that promises to keep the spotlight on strained Australia-China relations.

China dominates the world supply of rare earths, metallic elements used in everything from flatscreens and car parts to lightbulbs and i-Pods, but Lynas's proposed Mt Weld mine in west Australia promises to open up a major new source outside China.

State-owned China Nonferrous Metal Mining (Group) Co (CNMC) swooped last May on Lynas, then in financial straits and forced to halt work at Mt Weld, offering to inject around $366 million in a deal that would give the Chinese firm 51.6 percent of Lynas.

CNMC, however, will only have half of Lynas's board seats, with Lynas's Australian executive chairman retaining the casting vote.

Australia's Foreign Investment Review Board (FIRB), a secretive body that scrutinises all sovereign foreign investments, had already asked CNMC in July to resubmit its application for approval.

On Wednesday, Lynas told the Australian stock exchange that the FIRB had still not made a decision and that it now had until early October to make a ruling.

Lynas said it had A$8.6 million ($7.2 million) in cash as Aug. 31, enough to sustain the firm through to the end of October, adding that it was working on funding contingencies.

"Lynas is well advanced in finalising interim funding, should interim funding be required to cover Lynas' cash flow requirements," the company said.

Australia-China ties have come under strain as Canberra deals with a flood of Chinese state capital into the mining sector, provoking political concerns that Beijing could end up with undue influence over Australia's biggest export-earner.

In recent months, China has arrested an Australian executive of miner Rio Tinto (RIO.AX) (RIO.L) on charges of commercial espionage and cancelled a high-level visit to Australia after Canberra gave a visa to an exiled Chinese dissident.

The Rio Tinto arrest followed the Anglo-Australian company's decision to ditch a $19.5 billion equity tie-up with state-owned Chinese firm Chinalco, opting instead to forge an iron ore alliance with rival global miner BHP Billiton (BHP.AX) (BLT.L). (Reporting by Mark Bendeich; Editing by Jonathan Standing) ($1=1.199 Australian Dollar)