Digging Deep provides detailed insight and analysis into:
The nature of Chinese investors in the
industry – what was the number of investments
completed by state-owned enterprises as compared to private
enterprises and the rate of successful completion of announced
The investment strategies used by the Chinese
investors – was the purpose of entry to secure
supply, gain a financial return or enter into ancillary
What investors invested in – were
investments made into companies with projects at the exploration,
development or production stage and what was the value of these
The commodities which attracted a high intensity of
interest – which commodity sectors were targeted by
investors and did the interest in different commodity sectors
change over time?
The transaction structures used to successfully
complete investments – was the investment made into
shares at the corporate level, by purchasing assets or entry into a
joint venture at the assets level, or a combination of both? Did
the level at which the investment was made impact on the rate of
The management structures used by the investor to
manage their investments – was local management
retained or expat Chinese nationals appointed to executive level
The application of Australia's foreign investment
regulatory regime – how many investments were
rejected outright and what types of conditions were imposed by the
Foreign Investment Review Board?
Some of our key findings included:
Investments were to secure supply rather than gain a
financial return – 78% of completed investments were
for the purposes of securing supply
Investments were into projects at the development
stage, rather than at the exploration or production stage
– 67% of completed investments were into companies with
projects at the development stage
Interest in targeted commodity sectors changed over
time – it's now time for gold and energy.
Chinese interest in the iron ore and base metals sectors peaked in
2009 and has since dramatically decreased with the gold, oil &
gas and uranium sectors experiencing a high intensity of interest
between 2010 and 2012.
The acquisition of a passive minority interest at the
corporate level was preferred to a stake at the assets level or a
controlling stake at the corporate level. Approximately
50% of completed corporate level investments was for the
acquisition of a 10% to 20% shareholding interest
Investors preferred to rely on Australian management,
rather than expat Chinese nationals to manage the
investments. In investments which resulted in a change of
control at the corporate level, it was least likely that a Chinese
national would be appointed to the position of Chief Operating
Australia's foreign investment review regime is no
barrier to entry. The Foreign Investment Review Board
formally intervened in only 9% of all Chinese investments into the
industry since 2005. Only three investments are known to have been
We hope that Digging Deep will serve as a useful guide to
current participants and potential Chinese investors in
Australia's energy and resources industry.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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