Chinese mining investors should be more successful in the future - Australian Resources Minister

Chinese investors have more success getting Australia's mining sector investment approved in the future because they now understand how to navigate the process, Australian Resources Minister Martin Ferguson said on Wednesday.

China's commercial ties with Australia have been marred by controversy, with Canberra rejecting some takeover bids by Chinese state-owned firms. Chinese investors, in turn, have complained of confusion over the foreign-investment regime.

Ferguson said past rejections that have ignited diplomatic tensions should increasingly be rare.

"The so-called tension has largely disappeared. It's all about a learning process and they have a properly focused understanding on how to actually succeed with the investment," Ferguson told Reuters in an interview.

"You look at the investment over the last three years out of China (into Australia). It's huge across a range of commodities, from magnetite (iron ore), to coal, to uranium, LNG. They've had a lot of success."

Australia has been the biggest target for Chinese investment over the past five years, with direct investments worth more than A$16 billion, according to Australia's Treasury Department. Chinese interest has widened from resources into real estate, financial services and power generation.

China also buys more than a quarter of Australian exports, having overtaken Japan as the country's largest trading partner in early 2009. Two-way trade has now passed A$100 billion, up from A$57 billion in 2009.

But the difficulty some Chinese firms have had in sealing deals has soured ties.

In 2009, China Non-Ferrous Metal Mining Co was blocked from buying a controlling stake in rare earths miner Lynas Corp. . Australia also blocked China's Minmetals bid for Oz Minerals' Prominent Hill copper and gold mine because the mine was too close to a defence rocket range.

Ferguson said he now met frequently with China's ambassador to Canberra, while Chinese officials also held discussions prior to lodging applications with Canberra's secretive Foreign Investment Review Board, which scrutinises applications.

"They now have discussions with FIRB even before they lodge applications, get an assessment of what is required," he said.

China has previously lodged diplomatic complaints that foreign investment rules prevented Chinese-backed firms from bidding for natural resources tie-ups because rules said state-owned enterprises would not win approval if they bid for more than 50 percent of a company.

Indeed, changes to Australian investment rules in 2009 were aimed at limiting Chinese investments in local mining companies, according to confidential U.S. embassy cables obtained by Wikileaks and reviewed last week by Reuters.

The Australian Treasury's head of foreign investment, Patrick Colmer, briefed U.S. embassy officials on the new rules in September 2009. The diplomats then reported that Australia privately wanted to "pose new disincentives for larger-scale Chinese investments", according to the cables.

Treasurer Wayne Swan last week denied the rules were aimed at China, but said they were designed to clarify Australia's position on applications from foreign state-owned enterprises.

Swan in 2009 announced higher thresholds for investments that would need foreign investment approval, but he did not change the limits on investments requiring approval from foreign state-owned enterprises.

WOODSIDE DISPUTE

Ferguson, a former head of the Australian Council of Trade Unions (ACTU), is also tourism minister and photographs of himself with U.S. talk show queen Oprah Winfrey during a recent Australian visit decorate his office, along with a quirky Barbie doll in a Sydney Opera House dress.

He is also strongly pro-mining and his job includes smoothing strains with Australia's powerful resources sector over Prime Minister Julia Gillard's planned 30 percent profits-based tax on coal and iron ore miners.

Ferguson said the government saw no need to intervene in a dispute between Australian oil-and-gas producer Woodside Petroleum and East Timor over how to develop the Greater Sunrise gas field.

Woodside wants to develop the field, which straddles Australian and East Timorese waters, by building a multi-billion-dollar floating liquefied natural gas (LNG) plant. East Timor wants an LNG plant built on its shores.

"It's an issue I'm obviously paying attention to. I'm not in a hurry. These things will sort themselves out," Ferguson said.

Ferguson also rejected proposals by Greens lawmakers to change the tax treatment of condensate, which is a by-product of oil and gas production from Australia's North West Shelf project, also operated by Woodside.

Australia's influential Greens, which support the one-seat minority government in both the upper and lower houses, say an A$600 million excise exemption for condensate should be removed.

MINING TAX

Ferguson said he also expected mining tax laws to pass this year after Greens took the balance of power in the upper house Senate in July.

Gillard will have to rely on the support of Greens in both houses of parliament -- they have one lower house seat and will control the upper house from July 2011. But the government says that will not mean a stronger tax to satisfy Greens demands.

"In the minds of many companies, hopefully that's the end of the discussion," Ferguson said. "We've got a fair and balanced outcome."

On the eve of last year's election and staring at political oblivion, Gillard forged a deal with global miners BHP Billiton , Rio Tinto and Xstrata to cut the rate to 30 percent from 40 percent, and dropped the tax for companies with profits of less than A$50 million ($45 million).

UBS estimates the effective tax rate for companies affected would increase from 38 percent to 44 percent.

Ferguson said he was also aware of mining industry complaints of severe skills shortages that are expected to worsen over the next few years, particularly in powerhouse resource states like Western Australia and Queensland.

With the government looking at a plan to allow an extra 20,000 skilled migrants into Australia, the government would review immigration ahead of the May 10 budget, he said.

"There is a wealth of opportunities out there for us as a nation to get very talented, highly skilled young migrants," he said. (Additional reporting by James Grubel; Editing by Dean Yates)

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