SYDNEY - Australia on Thursday approved a revised $850-million Chinese bid for mines owned by OZ Minerals, but demanded state-owned Minmetals try to keep loss-making operations open to save local jobs as mine employment shrinks.

The move is likely to be studied for clues on how the government will approach other proposed Chinese deals, including a $19.5 billion investment by state-owned aluminium group Chinalco in Anglo-Australian miner Rio Tinto.

"It's positive for Chinalco as it's telling you Australia is approving Chinese deals with conditions," said an investment bank analyst, who asked not to be named because he was involved in similar deals with Chinese investors.

A statement by Minmetals in Australia said the Chinese firm was "delighted" to gain the approval, calling it a "milestone in Sino-Australian cross-border investment."

Last month, Australian Treasurer Wayne Swan surprised investors by rejecting Minmetals' original takeover bid for financially distressed OZ Minerals, saying one of its main mines was too close to a weapons-testing area in Australia's outback.

The Prominent Hill copper and gold mine has been excluded from the revised deal, already endorsed by Minmetals.

An incoming tide of Chinese capital into Australian mining has raised local fears that a raw materials-hungry Beijing wants influence over the country's biggest export-earning industry.

DJ Carmichael analyst James Wilson said Minmetals still may not provide a clear indication of how the government will treat Chinalco.

"It's like comparing apples and pears," he said. "Minmetals is an acquisition of assets, while the Rio-Chinalco deal is really an investment."

Also, the Chinalco deal, China's biggest offshore investment, involves a much larger, more important target: Rio is the world's third-largest mining house and second-largest iron ore supplier.

Swan said the OZ Minerals deal could proceed as long as Minmetals maintained employment at the Century zinc mine, which has been operating at a loss this year, and reopened the Avebury nickel mine, which Oz closed in December -- all contingent on the right "economic conditions".

Also, the new chief executive and chief financial officers must live in Australia most of the time.

Shouldering heavy debt, OZ Minerals has already cut production to 495,000 tonnes a year from 515,000 tonnes at Century, the world's second-largest zinc mine, laid off staff and delayed other projects to combat a sharp slide in metal prices.

"We are very pleased the treasurer has approved this transaction as it is the best currently available solution that resolves all the company's refinancing issues," OZ Minerals Chairman Barry Cusack said in a statement.

Anshan Iron and Steel Group Corp <0347.HK>, China's second largest steel maker, is also awaiting Swan's approval to almost treble its stake in Australian iron ore Gindalbie Metals <GBH.AX> to 36.28 percent. Gindalbie's chairman, George Jones, on Thursday called the waiting period "ridiculous."