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Chinese miner backs out of deal after U.S. objects
December 21, 2009 / 6:42 PM / 8 years ago

Chinese miner backs out of deal after U.S. objects

WASHINGTON (Reuters) - A Chinese mining company bowed on Monday to U.S. national security concerns and backed out of a deal to invest in a Nevada gold mine about 60 miles from a base the U.S. Navy uses to train its pilots.

“They basically let me know it was a tough call, but they ... didn’t feel it was in their best interest to push forward,” said Terry Lynch, chief executive of Firstgold Corp, a Nevada-based mining company.

Firstgold had lined up a $26.5 million deal with China’s Northwest Nonferrous International Investment Co to buy a 51-percent stake in the company and develop the Relief Canyon mine near Lovelock, Nevada.

Both companies were told last week by the Committee on Foreign Investment in the United States the deal raised national security concerns because of its proximity to U.S. military installations, Lynch said.

Those include Naval Air Station Fallon, home to the U.S. Navy fighter weapons school known as TOPGUN.

CFIUS, an interagency panel headed by the Treasury Department, was expected to recommend to President Barack Obama that the $26.5 million deal be rejected.

Congress toughened the CFIUS review process in 2007, after the committee’s approval of Dubai Port World’s purchase of U.S. port facilities set off a political furor.

BROADLY OPEN TO CHINA

Lynch said Northwest’s withdrawal meant the deal was dead so Obama would not have to decide the issue.

“It’s terribly disappointing. I understand Northwest’s position. They’re just a mining company looking to grow their mining portfolio globally. They had no idea that there was going to be such a political firestorm. This is way more than they bargained for,” Lynch said.

The company’s stock has been trading near 3 cents per share. It will now look for other investors, Lynch said.

A former U.S. trade official said he believed the United States remained broadly open to Chinese investment despite objections to this deal.

The case could have turned into a much bigger symbolic issue if Northwest had forced Obama to personally block the transaction as Lynch had said his company was willing to do, said Timothy Keeler, a lawyer at Mayer Brown LLP who worked in the George W. Bush administration.

“Anytime the president is involved in a decision, it becomes a big deal,” Keeler said, noting the amount of attention Obama’s decision to slap a 35-percent tariff on Chinese-made tires received compared to similar import duty decisions routinely made by the Commerce Department.

A U.S. Treasury spokeswoman said they were barred by law from commenting on specific cases, but referred to a statement Deputy Treasury Secretary Neal Wolin made last week.

“Foreign investments in the U.S. are critical to economic growth and job creation here at home, but we have an obligation to prioritize national security when a particular transaction threatens to impair national security,” Wolin said.

Reporting by Doug Palmer; Editing by Xavier Briand

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