Sinosteel Says Murchison Purchase to Depend on Market Prices

By Xiao Yu

Sept. 28 (Bloomberg) -- Sinosteel Corp., China's second- biggest iron-ore trading company, said its decision to buy a stake in Australia's Murchison Metals Ltd. depends on ``market conditions,'' according to president Huang Tianwen.

Sinosteel this month won Australia's government approval to buy up to 49.9 percent of Perth-based Murchison. Whether to proceed to plan depends on price and the terms of the contract, Huang said today at the World Economic Forum in Tianjin.

Sinosteel controls Midwest Corp., a neighboring iron ore producer to Murchison in Western Australia state's mid-west region. Murchison is seeking to develop a A$3.5 billion port, rail and mine project with Japan's Mitsubishi Corp. at Oakajee in the state.

The Chinese company will consolidate Midwest first before buying other assets, Huang said today. The Beijing-based company is also seeking to buy nickel and chrome assets, Huang said, without elaborating the location.

The Chinese company had previously sought approval to buy all of Murchison. That application was withdrawn.

``We are not disappointed'' about 49.9 percent stake, Huang said. The Australian government encourages Chinese investment because the two countries complement each other in many ways, Huang said.

The company has delayed a plan to sell yuan-denominated shares because of stock market slumps, Huang said. It hasn't given up the plan, he added.

Delaying IPO

The company plans to raise between 10 billion yuan and 20 billion yuan ($2.9 billion) from the A-share market in China and complete the deal by July, the Shanghai Securities News reported on Feb. 26, citing an unidentified company official. It hired BOC International (Holdings) Ltd. and JPMorgan Chase & Co. to help manage the share sale, the report said.

China's stock market, the world's fourth-worst performer this year, has shrunk 58 percent in market value, crimping companies' ability to raise funds.

The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, slumped on concern global demand for Chinese products will slow and as the government tightened lending to cool inflation.

To contact the reporter on this story: Xiao Yu in Tianjin on yxiao@bloomberg.net