Chinalco restructures partnerships with Rio Tinto, Alcoa
Chinese, Australian and U.S. aluminum firms plan more supply ventures
By Tom Stundza -- Purchasing, 2/12/2009 1:09:00 PM
Aluminum Corp. of China (Chinalco) of Beijing, one of the world's biggest aluminum producers, has made a couple moves in the past 24 hours that will give it a greater ownership stake in mining giant Rio Tinto.
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First, Chinalco said it will invest $19.5 billion in mining giant Rio Tinto Group creating joint ventures with Rio Tinto in aluminum, copper and iron ore mining.
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As part of its effort to expand its ownership in Rio Tinto, Chinalco will also pay $1.02 billion to U.S. aluminum giant Alcoa for its share of Rio Tinto (which Alcoa held through a joint venture with Chinalco). Alcoa will also stop participating in the project to develop the “Shining Prospect” special purpose vehicle, and use proceeds of the sale to invest in Rio Tinto.
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Chinalco also said it plans to work with Alcoa to expand commercial strategic ventures in bauxite, alumina, aluminum and fabricated products.
The Chinalco investment agreement will give the London and Melbourne-headquartered Rio Tinto greater access to China's steel and industrial market, where demand for raw materials has soared in recent years, according to chairman Paul Skinner. He tells the Associated Press that “we have long recognized and welcomed the growing participation of China in the global economy and) we believe this transaction is a logical step in advancing our capability in the Chinese market.”
Meanwhile, in a statement, Alcoa’s president and CEO, Klaus Kleinfeld, says the selloff of the motor vehicle partnership and Alcoa’s direct investment in Chinalco gives Alcoa much-needed cash and “strengthens Alcoa’s ability to weather the economic downturn.” He adds that “when the global economy recovers, the pent-up consumer and industrial demand will create a broad array of opportunities in both developed and developing regions for Chinalco and Alcoa.”
In another statement, Xiao Yaqing, president of Chinalco, says that “Alcoa is a respected leader in our industry and a valuable friend. We intend to grow our friendship and find ways to complement each other’s business on a global basis. As partners we will have many opportunities to prosper and revitalize the market.”
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