A fresh Chinese takeover for rare earths miner Lynas Corp would likely fail, after the head of the Foreign Investment Review Board said one of its prime concerns in examining investment in Australia's resources sector was market concentration.
FIRB chairman Brian Wilson gave a rare insight into the thinking of the powerful gatekeeper yesterday at an Australian Institute of Company Directors' lunch.
While not singling out Lynas, Australia's only rare earths' miner, he said the rare earths market was an example of where FIRB would take significant convincing to approve any foreign investment.
China controls 95 per cent of global supply.
"Obviously the more concentrated the market is, the more it is open to supply or price or market competitive impact, the more concerned we would be," he said.
"Rare earths, where a large (stake) or offtake agreement that may actually impact market volumes and prices . . . becomes more of an issue."
In 2009, China Nonferrous Metal Mining Group's $252 million play for 51 percent of Lynas to advance its rare earths project near Laverton was abandoned after FIRB imposed stiffer conditions on the deal.
It was a rare FIRB rejection and Lynas has since struck a funding alliance with Japanese trading house Sojitz Corp.
Mr Wilson used the example as part of what he said was an effort to demystify the FIRB process, which he argued was viewed as more certain, and superior, to countries including Canada and New Zealand.
He warned that rising xenophobic tension over foreign investment - not just from China - would hurt Australia's offshore investment-dependent economy.
China's emergence as an important investment partner was simply a reflection of increasing trade ties, he said, and over time the public would come to accept it as they had with Japanese investment in property in the 80s or American deals in manufacturing in the 70s. "The simple fact is success in trade leads to success in investment, and the current boom we have in investment from Asia says something about Australia's place in the world," he said.
Despite sabre rattling from some Coalition MPs, he thought Sino-Australian ties were in good shape.
He said China was not the only country with state-owned enterprises, and in any event FIRB considered an investment's commercial merits and market-control issues.