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    UPDATE: Sundance Says Trader Probe Won't Stymie Hanlong Deal
    11/10/2011 6:44PM

    (Adds Sundance assurances, comments from lawyers, recasts throughout.)


    By David Fickling

    Of DOW JONES NEWSWIRES

    SYDNEY (Dow Jones)--Sundance Resources Ltd. (SDL.AU), the African-focused iron ore miner that's a target of a 1.36 billion Australian dollar (US$1.35 billion) cash takeover by Chinese owned investor Hanlong Mining Group, played down fears Tuesday the deal could be derailed by an insider trading investigation into former employees and associates of the suitor.

    Perth, Australia-based Sundance--which hopes to dig 35 million metric tons of iron ore per year from its Mbalam iron ore project on the forested border of Cameroon and the Republic of Congo--said in a statement that it expects a decision from the Australia's foreign investment regulator "well within the indicative timetable" for a deal to complete next May.

    But experts who have worked with the country's Foreign Investment Review Board, or FIRB, said that a separate insider trading investigation by the country's markets watchdog could threaten that schedule. The case risks reigniting simmering tensions over mining and energy investment between Australia and its largest trading partner, China. Australia is China's largest supplier of the crucial steel making materials iron ore and coking coal, but the relationship has often been rocky.

    Chinese authorities in 2009 imprisoned Rio Tinto PLC (RIO) employee Stern Hu on bribery and corporate espionage charges. Beijing is keen to decrease its dependence on Australian iron ore, and investments in African mining projects such as Sundance's Mbalam are a key plank of that strategy.

    Simon Morris, a Melbourne-based partner with Corrs Chambers Westgarth lawyers, said that Australia would be sensitive to the parallels with Stern Hu. "The Hanlong case is quite sensitive at an international level," he said. "It won't suit us for this to be represented as the counterpart of the Stern Hu case."

    Hanlong's former managing director, one former board member, a former employee and two alleged associates are being investigated by the Australian Securities and Investments Commission, or ASIC, in connection with share trades that took place either side of the announcement in July of Hanlong's initial bid for Sundance. That could potentially hold up the FIRB approval.

    "FIRB is likely to require further progress on ASIC's investigations before passing the deal," a person familiar with the deal said, adding they still think it would be completed by May. Calls to Hanlong Mining's board were not returned.

    Justin Shmith, a partner at Blake Dawson lawyers in Melbourne, said that although FIRB would be reluctant to block the takeover, it would be unlikely to pass it while the ASIC investigation was still ongoing.

    "Waiting for ASIC creates a level of uncertainty about how long the delay will be," he said. "It could well be beyond May."

    Insider trading investigations in Australia are frequently drawn-out affairs. ASIC took six months to bring a case against Citigroup Inc. (C) over alleged insider trading breaches during Toll Holdings Ltd.'s (TOL.AU) 2005 takeover of port operator Patrick, and lost in court a further 16 months later. An ultimately successful insider trading case against former Telstra Corp. Ltd. (TLS.AU) director Stephen Vizard took five years to work its way through the courts.

    Morris said that FIRB would prefer not to block the takeover, given that Sundance's assets are outside Australia and shareholders are free to accept or reject the proposal.

    "If the company's happy and there's cash on the table it would be a very brave call by FIRB to block it," he said. But the regulator's approval could only come when and if ASIC decided there were no broader issues to investigate around Hanlong, he added.

    Hanlong Mining, a subsidiary of infrastructure and utility group Sichuan Hanlong, also owns a majority stake in molybdenum miner Moly Mines Ltd. (MOL.AU) and smaller holdings in several other Australian mining companies.



    E.

 
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