(Reuters) - Hanlong Mining and Sundance Resources (SDL.AX) have agreed to delay to November the target date for the Chinese firm to seal a A$1.34 billion ($1.3 billion) takeover of the Australian group as Hanlong is struggling to line up funding from China.
The long delay on the deal, first announced last July, is the latest evidence of China's reluctance to make big bets on risky resources projects offshore amid uncertainty over the pace of economic growth at home.
Global markets have been rattled by signs of slowing growth in the world's No.2 economy, which is hurting demand for commodities and led Premier Wen Jiabao to push forward key investment projects to revive growth.
Hanlong wants Sundance for its $4.7 billion Mbalam iron ore project on the border of Congo and Cameroon in western Africa, seen as a major new source of iron ore that could diversify China's dependence on Australia and Brazil.
The project, which includes building a 510 km (320 mile) rail line and a deep water port, has yet to secure key approvals expected months ago from the two governments and financing from the Chinese Development Bank.
The difficulties in getting big projects up and running in a rising cost environment have made Chinese companies and their lenders hesitant to make big new investments, China's ambassador to Australia recently said.
"So particularly given the current situation in the world economic and financial situation, there are still some uncertainties, so I think that companies will emphasize more caution and be more careful in making such investments," Chen Yuming told Reuters in an interview earlier this month.
Mbalam is expected to produce 35 million metric tons a year of iron ore. This compares with a forecast 55 million metric tons this year from Australia's Fortescue Metals Group (FMG.AX), the world's number four iron producer.
Hanlong, which owns 18.6 percent of Sundance, had hoped to line up backing for the takeover from the China Development Bank last November, but has now pushed the deadline for that funding out to August 31.
The revised scheme implementation agreement (SIA) was agreed following discussions with the governments of Congo and Cameroon as well as China's National Development and Reform Commission and the China Development Bank.
"It reflects the substantial progress made in discussions in recent weeks, the strong desire of all the parties to finalize the SIA and their resolve to do it as efficiently as possible," Sundance Chairman George Jones said in a statement.
He said they now hope to complete a deal by mid-November, having now established "a clearer understanding of the needs of China's National Development and Reform Commission and Hanlong's financiers, the China Development Bank."
Sundance's shares jumped 5 percent to A$0.42 as investors gained comfort the deal may still go ahead. But the shares were still 16 percent below Hanlong's offer price of A$0.50 a share.
Australia's Foreign Investment Review Board also still needs to approve the takeover, which Sundance said is expected by June 30.
The FIRB has held off making a decision pending the outcome of an insider trading investigation by Australian regulators into former Hanlong executives in Australia.