beyondbrics

By Mark Shapland of mergermarket.com

Controversy, what controversy? Just weeks after Australia’s planned mining tax had investors running scared, the country is receiving yet more Asian investment.

Chinese and Indian companies have long made purchases in Australia, the world’s biggest exporter of iron ore and coal. But the most recent move shows the ambitions of a third Asian player – South Korea.

LS-Nikko, a Korean smelting giant with no current holdings in Australia, is taking a 12.5 per cent stake in Sandfire Resources, a metals explorer. Sandfire will issue 18.7 million shares to LS-Nikko at a price of $5.02 each, representing a ten per cent premium over market valuation and a total investment of $94m.

Sandfire is no stranger to Korean interest. In 2008, POSCO, a Korean steel producer, bought a 20 per cent stake. Recently Sandfire was subject to rumours of a local takeover bid from OZ Minerals; the move by LS-Nikko may now damage OZ’s hopes.

LS-Nikko’s cash injection will finance Sandfire Resources’ exploration programme at the DeGrussa Copper-Gold Project in Western Australia. The 6km-long corridor at DeGrussa currently contains four high-grade copper-gold deposits.

“The strategic alliance with LS-Nikko complements the existing relationship which we put in place with POSCO two years ago,” Sandfire’s managing director, Karl Simich, said. “That partnership has been very productive for Sandfire, giving us the strategic backing and access to funding which enabled us to discover the world-class DeGrussa Project last year.”

In previous years, Asian investment in Australian mining has caused tensions. This time, however, Australians might actually be relieved to see foreign companies displaying confidence in their country’s regulatory regime.

Related reading:
South Korea: a head of corporate steam, beyondbrics