--China Steel drops plan to invest Australian coal mine owned by MCG

--Company still in talks with other targets about stakes in coal mines

(Adds details, comment from executive, background)

 
   By Fanny Liu and Lorraine Luk 
 

TAIPEI--China Steel Corp. (2002.TW) said Friday that it has dropped a plan to invest in an Australian coal mine owned by MCG after one of the mine's shareholders exercised a right to increase its stake.

China Steel, Taiwan's biggest steelmaker by revenue, said in February that it approved an investment of 102 million Australian dollars (US$95.03 million) in the MCG mine--A$50 million to buy a 10% stake and A$52 million for capital expenditure.

It was unable to complete the deal after MCG shareholder Peabody Energy Corp. (BTU) exercised its priority right, it said in a statement after its board meeting. It had not made any payment toward the acquisition, it said.

China Steel will continue seeking stakes in overseas mines as part of a plan to boost its self-sufficiency ratio in iron ore and coking coal to 9% this year, Lee said.

"We are still in talks with five to six acquisition targets in Australia, Brazil, Indonesia and Canada," Executive Vice President Steve Lee said, but he declined to reveal more details.

Chairman Tsou Jo-chi told shareholders at the company's annual general meeting earlier Friday that it will continue to invest in iron ore and coal mines abroad to cut feedstock expenses.

As part of its overseas acquisition drive, China Steel agreed in late April to buy a 2.5% stake in the Roy Hill iron ore project in Western Australia from South Korea's Posco for A$305.2 million.

-By Fanny Liu, Dow Jones Newswires; +886 25022557; fanny.liu@dowjones.com