The Australian government has given the nod to a Chinese party becoming the largest shareholder of debt-laden zinc and copper miner Kagara.
The approval by the Foreign Investment Review Board clears the way for state-owned Guangdong Foreign Trade Group Co Ltd (GFTG) to take a 19.9 per cent stake in the miner.
GFTG will initially invest $57 million at 60 cents per share through an entitlement offer shortfall and a placement for a 15 per cent interest.
Shares in Kagara were up half a cent at 68 cents in afternoon trading.
It is also entitled, subject to Kagara shareholder approval, to increase its equity to 19.9 per cent by subscribing for additional, new shares in the company at 80 cents a share by August 10.
GFTG will be entitled to appoint one representative to Kagara's board.
''The proposed investment will allow Kagara to significantly reduce its debt and enhance its future funding flexibility,'' the Perth-based company said in a statement on Thursday.
Kagara recently raised more than $150 million through a rights issue, which was less than the $262 million it said last month was its target.
Kagara had substantial debt and only $2.7 million cash on hand at the end of March, and has been hampered by lower base metals prices and copper hedging contracts.
According to recent reports from China, GFTG's expansion plans over the next three years include listing five companies and increasing its focus on hardware and building materials, mining and metallurgy, and chemical products.
Its investment in Kagara is its first in Australia and representatives will visit Perth shortly for a signing ceremony with Kagara.
AAP
