Sinosteel acquires controlling stake in Australian miner Midwest

State owned Chinese steel trader has acquired a controlling 50.9-per cene stake in Australian iron ore miner Midwest, to secure iron ore supplies.

Sinosteel's a $1.3-billion takeover bid for Midwest sent the Australian compny's shares shares up 1.5 per cent to $6.29. In January Sinosteel made the first ever hostile bid by the Chinese for an Australian company, when it made an unsolicited offer for an Australian business, but was rebuffed after local firm Murchison Metals unveiled an A$1.5 billion merger proposal for Midwest Corporation, trumping Sinosteel's A$6.38 a share bid, which valued the company at A$1.36 billion.

However, a sweetened deal was recommended by the Midwest board in May, though the deaol could be derailed by Murchison Metals, which owns a 10-per cent stake in Midwest.

In recent months, Chinese comopanies have been trying to acquire mining assets in a bid to secure their raw material supplies. China, which is the top steel producer globally, does not have high-grade iron ore.

Three Chinese companies, Sinosteel, Baosteel and Chinalco, are vying for a stake in Australia's new iron ore giant, Fortescue Metals Group, as they look for fresh investments in Australian resources, by axcquiring Harbinger Capital Partners' 16 per cent stake in Fortescue.

However, the Australian government is chary of Chinese cntrol over its assets, and authorities are exercising caution after Chinalco's acquisition of a nine per cent stake in Rio Tinto, Australia's largest iron ore miner. Chinalco's $14 billion raid on Rio's London shares in February had complicated a hostile offer for Rio by Australia's BHP Billiton Ltd/Plc.

Sinosteel's deal with Midwest is part of a wider plan by China to keep its steel industry well stocked with raw materials, as the Chinese steel industry depends on two mining giants, Rio Tinto and BHP Billiton, for the majority of its raw materials. Recently the two miners had won over 80-per cent price increases from chinese steel makers.