Today I approve the application by Hunan Valin Iron and Steel Group for up to a 17.55 per cent shareholding in Fortescue Metals Group, subject to the formal and strict undertakings I have sought from Hunan Valin, and which have also been agreed to by Fortescue Metals Group.
These undertakings are as follows:
- Any person nominated by Hunan Valin to Fortescue's board will comply with the Director's Code of Conduct maintained by Fortescue;
- Any person nominated by Hunan Valin to Fortescue's board will submit a standing notice under the Corporations Act 2001 of their potential conflict of interest relating to Fortescue's marketing, sales, customer profiles, price setting and cost structures for pricing and shipping; and
- Hunan Valin and any person nominated by it to Fortescue's board will comply with the information segregation arrangements agreed between Fortescue and Hunan Valin.
Hunan Valin will report to FIRB on its compliance with these undertakings.
These undertakings ensure consistency with Australia's national interest principles for investments by foreign government entities, which I set out in February 2008. They ensure the appropriate separation of Fortescue's commercial operations and customer interests, and support the market-based development of Australia's resources.
Penalties for non-compliance with these undertakings are contained in the Corporations Act 2001 and breaches of the Code of Conduct can lead to the director's removal from the company board.
I note Fortescue's involvement in negotiating the above arrangements, and its responsibility to its shareholders for enforcement of the company's Directors' Code of Conduct.
Under the proposal, Fortescue has agreed to issue new shares to Hunan Valin to raise funds for the next expansion phase of its iron ore mining operations in the Pilbara. Hunan Valin also intends to acquire some shares from other shareholders.
Consistent with this approval and with its agreement with Fortescue, Hunan Valin will not hold above 17.55 per cent in total.
It is on these bases that I have approved the acquisition under the Foreign Acquisitions and Takeovers Act 1975.