SYDNEY Australia has approved Chinese aluminum giant Chinalco's recent purchase of a minority stake in Anglo-Australian miner Rio Tinto, but warned the Chinese firm against buying more shares without prior approval.
State-owned Aluminium Corp of China (Chinalco), backed by U.S. peer Alcoa Inc, began amassing shares this year with the aim of taking up to 14.9 percent of Rio, the target of a $127 billion takeover bid from rival BHP Billiton
"I have decided to raise no objections under Australia's foreign investment policy to Chinalco acquiring a shareholding interest of up to 14.99 percent of Rio Tinto Plc on the basis of Chinalco making two undertakings," Treasurer Wayne Swan said in a statement posted on his office's Web site on Sunday.
He said Chinalco had already promised to meet these conditions by vowing not to raise its stake above 14.99 percent without receiving fresh government approval and, secondly, not to seek to appoint a director to Rio Tinto's board.
Rio Tinto is at the centre of a tug-of-war that reflects China's anxiety over BHP Billiton's proposed all-share bid for Rio, which would create a titan unrivalled in its degree of control over a wide range of industrial commodities.
Rio is a major aluminum producer and both it and BHP are global suppliers of copper, but China's biggest concern over the takeover bid surrounds iron ore, which is used in steel-making.
Rio and BHP are the world's second and third largest iron ore producers, respectively, and some industry experts saw Chinalco's move in January as a move by Beijing to protect its steel sector.
China's move on Rio Tinto was followed by swoops on smaller Australian iron ore miners, which in turn has prompted Australia to promise more scrutiny of investments in local miners by foreign states, especially those that are major customers.
But the government has made it clear that it will decide each case on its merits and the national interest.
"While Australia welcomes foreign investment in our economy, we will carefully examine national interest issues where these arise in relation to foreign sovereign ownership," Swan said.
"I have determined that the undertakings agreed with Chinalco are acceptable for protecting the national interest in this matter."
(Reporting by Michael Perry; Editing by Louise Heavens)