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Chinalco to hike Rio Tinto stake
By Jiang Wei (China Daily)
Updated: 2009-02-13 08:22 Aluminum Corp of China (Chinalco) has proposed injecting $19.5 billion into London-based Rio Tinto Ltd, one of the largest mining corporations in the world.
Chinalco proposed to buy $7.2 billion of convertible bonds from Rio and stakes in iron ore, copper and aluminum projects for $12.3 billion, the company said yesterday in a press release. The proposal would result in the State-owned company's stake in Rio increasing to 18 percent from the current 9.3 percent.
"Commodity prices are at historical low levels and it will benefit China to secure key resources now," said Peng Bo, an analyst at Ping An Securities Co. He added the move may help Chinalco lay the foundation for becoming an international mining giant - the long-term goal of the company. Chinalco's president, Xiao Yaqing, said: "The deal, which follows our acquisition of a significant stake in Rio Tinto in February 2008, also shows Chinalco's confidence in China's economic growth and commodity markets."
Chinalco's investment is a huge boost for the London-based company, which is aiming to pay back about $10 billion of its $38 billion debt by the end of 2009 by axing some 14,000 jobs worldwide, selling assets and cutting spending. The transaction is still subject to approval from Rio's shareholders and the Chinese, Australian, Canadian and US governments. After the deal, the two sides would establish joint ventures to supervise projects in which Chinalco holds a stake. Chinalco would appoint two non-executive directors to the miner's board. Rio would enter into exploration in China in partnership with Chinalco. Share price of Chalco, the listed arm of Chinalco, jumped 5.64 percent to 10.49 yuan yesterday in Shanghai trading. Its shares in Hong Kong declined 4.77 percent to HK$4.19. (For more biz stories, please visit Industries)
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