Chinalco won’t see control of Rio Tinto Group
President Xiong sees outlay as non-controlling investment
By Tom Stundza -- Purchasing, 3/2/2009 11:03:00 AM
The new president of Aluminum Corp. of China says Chinalco won’t seek control of the Rio Tinto Group. The Chinese firm has offered to invest $19.5 billion investment in the Australian mining firm Beijing-based Chinalco would raise its stake in Rio Tinto to 18% if all of the debt it’s buying were converted to stock.
As reported earlier on Purchasing.com, Chinalco plan to double its stake in Rio Tinto comes through a planned buyout of Alcoa’s interests in the Australian mining firm. The plan has triggered a huge political controversy in Australia because its needs government approvals..
Chinalco's new president, Xiong Weiping, today says any deal with Rio Tinto won’t lead to control of Australian iron ore, copper and aluminum firm. “Through this transaction we do not attain or achieve any control in any sense in Rio Tinto,” Xiong tells reporters in Sydney, speaking through a translator. “What we are getting are non-controlling economic interests.”
A deal between Rio Tinto and Chinalco would enable Rio to pay down its $39 billion debt load. That debt was accumulated when Rio bought Canadian aluminum firm Alcan in 2007, near the top of the commodities boom. A Bloomberg report says that Chinalco, seeking to become a diversified mining company, would consider further purchases that fit with its development strategy. Reason: Commodity prices and demand haven’t yet bottomed Xiong says. “The whole sector is operating in a very unstable and volatile environment,” he tells reporters. “It is very hard to predict the movement of prices.”
The deal needs Australian foreign investment approval, but some Australian politicians are wary of handing stakes in some of the country's most important mines to China, which is Australia's biggest export customer. Also, some of Rio's major shareholders have protested their holdings might be diluted and are pressing Rio Tinto to offer new shares to them on the same terms as Chinalco.
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