A Chinese company has abandoned plans to take control of rare earths explorer Lynas Corporation after Australian regulators demanded it reduce the scope of the planned transaction.
A Chinese company has abandoned plans to take control of rare earths explorer Lynas Corporation after Australian regulators demanded it reduce the scope of the planned transaction.
Lynas said in a statement today that China Nonferrous Metal Mining (Group) Co had terminated the proposed $505 million transaction announced in May, whereby it would take a 51.6 per cent stake in the Sydney company.
"As a result of additional undertakings recently sought by the Australian Foreign Investment Review Board (FIRB), CNMC has terminated the CNMC transaction," Lynas said.
"The additional undertakings recently sought by the FIRB included reducing the proposed percentage ownership to be held by CNMC to below 50 per cent and reducing the number of board director positions to be held by CNMC to less than half of the board.
"These were in addition to already agreed undertakings between Lynas and CNMC aimed at ensuring independent director control of all marketing of rare earths products."
Market observers say the deal was an example of China's bid to tighten its grip on the rare earths market.
About 95 per cent of the world's rare earths are produced in China.
Lynas' proposed deal with CNMC came under the spotlight earlier this month after a Chinese official recommended banning rare earths exports to prop-up prices.
The announcement is below:
Lynas Corporation Limited (ASX: LYC) provides the following update concerning the proposed equity investment by China Nonferrous Metal Mining (Group) Co., Ltd ("CNMC") that was announced on 1 May 2009 (the "CNMC Transaction").
As a result of additional undertakings recently sought by the Australian Foreign Investment Review Board ("FIRB"), CNMC has terminated the CNMC Transaction. The additional undertakings recently sought by the FIRB included reducing the proposed percentage ownership to be held by CNMC to below 50% and reducing the number of Board director positions to be held by CNMC to less than half of the Board. These were in addition to already agreed undertakings between Lynas and CNMC aimed at ensuring independent Director control of all marketing of rare earths products.
As at 23 September 2009, Lynas had approximately A$7.5 million cash at bank. Lynas is well advanced in finalizing interim funding to ensure that the company continues to have adequate working capital. Further details will be provided as soon as the interim funding is finalized.
