Asian companies are tipped to increase stakes in Australia's resources sector. Richard Szabo spoke to firms to find out what opportunities there are in the golden West

Chinese, Japanese and Korean companies are preparing to increase stakes in the Australian resources sector, which means there could be more M&A work on the way for lawyers.

DLA Phillips Fox partner Robert Edel for one believes there will be a significant increase in Sino-Australian M&A next year. This is partly because many Asian companies are sitting on significant cash reserves, have strong balance sheets and are waiting for the banks to return to normal lending practices. But it is also because with a weak Aussie dollar and startlingly low P/E ratios scattered throughout the ASX, some Australian assets are currently looking like real bargains.

Chinese steel producer AnSteel's move to increase its stake in its Australian joint venture partner Gindalbie Metals (A$162m) (acted on by Clayton Utz partner Mark Paganin), and Chinese traders increasing their stakes in Mount Gibson, which faced near closure and agreed to sell at a discounted price, are perhaps signs of things to come.

Corrs Chambers Westgarth partner Adam Handley reports multiple requests for assistance from Korean, Japanese and Chinese clients, looking to acquire gold, coal, uranium and iron ore projects in Australia. None of the deals can be made public at the moment but intelligence from Mergermarket supports his claim that deals are in the making.

Japan-based Sumitomo, Mitsui and Mitsubishi UFJ are all reportedly keen to invest in Australian mining operations. In fact, analysts say these companies are likely to target coal within the next year and Aquila Resources, Felix Resources and Gloucester Coal are possible targets. White Energy Company has confirmed its willingness to consider a takeover bid.

The Australian federal government has attempted to expand uranium mining in Western Australia and Mallesons' head of resources Perth-based Alan Murray says it would provide longer-term work for law firms. Murray says uranium mining would create more work, particularly in developing and implementing new aspects of environmental and other regulation around uranium mining and handling.

It could also increase project development and potential merger activity, as clients move from exploration to development. Uranium mine developments are likely to take longer to commence, according to Murray. He says the uranium market is tighter than commodities such as iron ore and "consequently, companies wouldn't worry as much about short-term minerals prices as others now need to do, for example in iron ore."

Johnson Winter & Slattery partner Rick Malone says most iron ore miners are trading at substantial discounts compared to 12 months ago, making smaller miners attractive targets. "The Chinese still require secure iron ore supplies at a reasonable price and many of the juniors are very attractive propositions," he said.

However, Edel says M&A is not likely to be confined to small players: "it won't be restricted to small players in the sector; it will reach the mid range in coal, base metal, uranium or gold. If they have good assets and access to rail and port infrastructure they'll be good targets." In the short-term the declining Australian dollar coupled with recent falls in key commodity prices has created favourable conditions for acquirers. Since the dollar is likely to remain weak it could mean that foreign investment in the energy & resources sector will remain active for the next 12 months. ALB