Australia removes restriction on Chinese SOE

Australian Treasurer Joe Hockey announced Wednesday that the Australian government has made a decision to remove certain foreign investment conditions placed on Yanzhou Coal Mining Company, a Chinese state-owned enterprise, restricting its ownership of Yancoal Australia Limited, an Australian based coal producer of Yanzhou Coal Mining Company.

Yancoal Australia operates several mines in New South Wales and Queensland.

According to Hockey, these conditions required Yanzhou Coal to reduce its ownership in Yancoal from 100 percent to less than 70 percent and its economic interest in Yancoal's former Felix Resources coal mining assets to less than 50 percent by the end of 2013; and to reduce its economic interest in the Syntech Resources and Premier Coal mines to less than 70 percent by the end of 2014.

Hockey said that the conditions imposed in 2009 also provided Yanzhou Coal with the ability to seek the Treasurer's approval to vary these conditions if they were impacted by changes in economic conditions or other factors.

"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," Hockey said.

According to the statement, to date, Yanzhou has made progress in meeting those conditions by reducing its stake in Yancoal to 78 percent.

"It has sought my approval to have the conditions removed so it can maintain its existing stake," he added.

According to local media, Yanzhou Coal, which owns 78 percent of Yancoal, in July proposed to purchase the rest of the company from shareholders, a plan that ran counter to Australian Foreign Investment Review Board's (FIRB) requirement.

The regulator's requirement means Yanzhou Coal has less than two months to sell at least 8 percent of Yancoal.

Yanzhou Coal's agreement to cut its stake stems from its purchase of Felix Resources Ltd. for 3.3 billion AU dollars (3.1 billion U.S. dollars) in October 2009. After buying Felix, Yanzhou Coal renamed the company Yancoal. At the time, FIRB ruled that Shandong-based Yanzhou Coal must list a minimum of 30 percent of its Australian firm by the end of 2012.

Last year, Yanzhou Coal bought Gloucester Coal Ltd. and merged it with Yancoal. The combined entity kept Gloucester Coal's listing and trades in Sydney with a market value of 711 million AU dollars (648 million U.S. dollars). After the Gloucester Coal deal, Yanzhou Coal was given a deadline of Dec. 31 to reduce its Yancoal stake.