Australia Eases Foreign Ownership Curbs on Yancoal

SYDNEY--Australia's Treasurer relaxed ownership restrictions tied to one of China's biggest purchases of a resources company, easing doubts about the new government's willingness to attract foreign investment just weeks after it vetoed a U.S. bid for a major grain exporter.

Treasurer Joe Hockey said Yanzhou Coal Mining Co. (YZC) no longer needed to meet a Dec. 31 deadline for reducing its stake in Yancoal Australia Ltd. (YAL.AU) below 70%, citing the downturn in global coal prices. Yanzhou, which owns 78% of Yancoal Australia, had made the commitment in 2009 to complete its 3.5 billion Australian dollar (US$3.2 billion) takeover of Felix Resources Ltd.

"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," Mr. Hockey said in a statement.

Australia's government has faced criticism about its openness to foreign investment following Mr. Hockey's decision not to allow U.S. agribusiness Archer Daniels Midland Co.'s (ADM) A$3 billion takeover bid for GrainCorp Ltd. (GNC.AU) to proceed.

Australia has recently been struggling to maintain investment in its mines, which are the biggest suppliers of coal to China. Rio Tinto PLC (RIO), BHP Billiton Ltd. (BHP), and Peabody Energy Corp. (BTU) have put some of their Australian coal assets up for sale as the outlook for the sector dimmed.

As a state-owned company, Yanzhou has greater access to capital than the Australian unit. This gives it more firepower to expand existing mines in eastern Australia's New South Wales and Queensland states or invest in new projects.

Write to Rhiannon Hoyle at [e-mail]

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