Serious questions should be asked about the whole business model...

Serious questions should be asked about the whole business model that was used to set up Karara. The Chinese state has lent money to itself (Ansteel) - at whatever rate - and is now holding Karara as ransom. It should be made clear to them that they will never be allowed 100% ownership. Private Australian equity is invested in the project and the Chinese would never have gotten the project to the point it is, without an Australian partner.
Serious questions do indeed need to be asked. For e.g. what exactly is the interest rate applied to the loan that the Chinese are charging themselves?