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September 25, 2009

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Home » Business » Energy

Australian fears end Lynas bid

THE China Nonferrous Metal Mining (Group) Co has dropped plans to buy a controlling stake in Australian rare earths miner Lynas Corp after Australian regulators demanded it reduce the size of the transaction.

The conditions imposed by the Foreign Investment Review Board reflect Australia's concern the takeover would give China too much control over rare earths, a collection of metallic elements vital to the production of hybrid cars, wind turbines, computers, mobile phones, flat-panel displays, lasers, fiber optics and other high technologies.

China already possesses more than 90 percent of the world's supply of rare earths, and Lynas has said it owns the world's largest undeveloped deposit.

The Foreign Investment Review Board ruled that state-owned China Nonferrous must limit its stake to below 50 percent, Lynas said yesterday. The Chinese company has terminated the deal because of additional undertakings sought by the review board, it said.

China Nonferrous couldn't be reached for comment.

In May, Lynas said China Nonferrous would pay A$252 million (US$220 million) and arrange low-cost financing for the development of Lynas projects in exchange for a 51.6 percent stake.

Lynas has been seeking funding to resume work on a Western Australia mine that was suspended in February.

The company said it is "well advanced" in finalizing interim funding to ensure adequate working capital.

The China Nonferrous-Lynas tie-up burst into the public spotlight earlier this month following reports that China would limit its production and export of rare earths to counter a drop in prices.

Patrick Colmer, a director of the Australian review board, told a Sydney forum yesterday that foreign investors seeking stakes in Australia's major resources companies should limit their planned holdings to no more than 15 percent if they want to improve their chances of winning approval.

The board scrutinizes foreign investments above a certain threshold and makes recommendations to Treasurer Wayne Swan, who has the final say.

In a bid to reassure investors, Swan last month announced an easing in foreign investment rules, but only to private-sector investors.


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