A leading Chinese company has been given approval to lift its shareholding in Murchison Metals.
The Federal government's decision will see Murchison shares jump today on the ASX.
Murchison shares jumped 10.9% in Friday's big surge to close up 12c at $1.22. They had been weak for the last few weeks as investors have gone cold on resource stocks and Sinosteel moved to mop up Midwest.
Now it can switch its attention to Murchison.
Sinosteel has a small stake in Murchison, but close to 20% is controlled by the Harbinger hedge fund of the US. It delivered control of Midwest to Sinosteel last week by reversing its opposition to the Midwest bid and accepting the Sinosteel cash offer.
The Government's decision will mean that Sinosteel has also been allowed to tighten its control on the Mid-west iron ore province east of Geraldton in Western Australia.
The Federal Government has green-lighted an application by Sinosteel Corporation of China to acquire up to 49.9% of Murchison Metals, but not control, according to a statement from the Federal Treasurer, Wayne Swan yesterday.
Mr Swan said that he made the ruling under the Foreign Acquisitions and Takeovers Act 1975. It had been expected for some time and came less than a week after Sinosteel secured control of rival Midwest Corporation and moved to compulsorily acquire the outstanding shares in Midwest.
Sinosteel had previously sought to acquire up to 100% of Murchison, which was the subject of an Interim Order under the Act. Sinosteel withdrew that application after some opposition was voiced.
Mr Swan said that "there have been significant developments since the original application was made.
"The Western Australian Government recently awarded rights to construct new port facilities at Oakajee to a joint venture between Murchison and Mitsubishi Corporation.
"It is also considering proposals to build new railway lines to link the iron ore deposits in the Mid West region to the port.
"Sinosteel has recently acquired more than 97% of Midwest Corporation Limited which has iron ore deposits adjacent to Murchison's.
"Midwest and Murchison have previously sought to merge their operations by takeover proposals that did not proceed.
"The Government welcomes foreign investment in Australia and I will continue to ensure that investments are consistent with Australia's national interest.
"The Mid-West region may ultimately become a significant new source of iron ore exports to the north Asian iron and steel markets.
"Murchison is an emerging iron ore miner with deposits in the region.'
Mr Swan that that "In determining this application, I have determined that a shareholding of up to 49.9% in Murchison will maintain diversity of ownership within the Mid West region.
"The Government considers the development of such potentially significant new resource areas should occur through arrangements that are open to multiple investors.
"This approach is consistent with the national interest principles we released in February and with the approach I have outlined previously, including in discussions with my Chinese counterparts.
"The Government's objective is that development of our considerable natural resource endowment occurs in a manner that allows Australia to remain a reliable supplier in the future to all current and potential trading partners.
"This ensures the maximum development of our resources and a fair return to all of the Australian community."
Sinosteel had offered $6.38 a share offer for Midwest.
The acquisition was the first successful hostile Chinese takeover of an Australian company and became possible after Murchison's former Midwest deputy chairman David Law and US investor Philip Falcone agreed to the offer at the last minute early last week.
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