The stance taken by Hockey contrasts with the boundaries set on Yanzhou’s takeover of Australian coal producer Felix Resources by the previous government in 2009.
As part of that approval Yanzhou was required to list Yancoal (the renamed Felix) and sell down to a 70% stake by the end of 2012, with Yanzhou given a time extension to do this by the end of 2013 after Yancoal merged with Australia-listed Gloucester Coal last year.
Hockey has instead decided to remove the takeover conditions, which also included a commitment for Yanzhou to reduce its economic interest in the Syntech Resources and Premier coal mines to less than 70% by the end of 2014.
Hockey attributed his decision at least partly to the coal downturn in Australia.
“Since those conditions were imposed, significant challenges have emerged for the Australian coal industry, including slowing demand, declining coal prices and a number of mine closures,” he said.
“In commitments provided to me, Yanzhou has undertaken to continue to support Yancoal’s ongoing operations in Australia, thereby maintaining its position as a major regional employer.
So long as Yanzhou continues to own at least 51% of the shares of Yancoal, Yanzhou will ensure Yancoal continues to operate so that it remains solvent. In addition, Yanzhou will extend its existing loans to Yancoal if required, and will support Yancoal’s plans to expand the Moolarben open cut mine.”
But open free-market thinking also seemed apparent with Hockey as he discussed Yanzhou’s aim to acquire Yancoal.
“Yanzhou has previously considered options to seek 100% ownership of Yancoal,” he said.
“While foreign investment proposals are considered on a case-by-case basis, the government has no in-principle objection to 100% foreign ownership of Australian companies where it is not contrary to the national interest and is open to any such proposals from Yanzhou in the future.”
Yancoal is seeking guidance from Yanzhou in response to this news.
“Yancoal’s independent board committee is engaging with Yanzhou in relation to the Treasurer’s decision, including in relation to the commitments provided by Yanzhou to the Treasurer and how this impacts upon Yanzhou’s privatisation proposal in respect of Yancoal,” it said.
Yancoal operates the Austar, Ashton, Donaldson, Duralie, Stratford and Moolarben coal operations in NSW, plus the Yarrabee and Cameby Downs mines in Queensland, with the Middlemount operation in Queensland being a partnership with Peabody Energy.
