Alcan owners pave way for Chinese to up stakes
Feb 3 2009 by Iain Laing, The Journal
MINING company Rio Tinto has paved the way for the Chinese Government to up its stake in the firm after confirming talks over a potential investment.
The company, which owns the aluminium smelter in Lynemouth, near Morpeth in Northumberland, said it had held discussions with state-owned Chinalco over the possibility of the firm “acquiring minority interests in various operating businesses” of the group. It said Chinalco – which already owns 9% of Rio – was also considering investing in bonds which could later be converted into a full equity stake in the company.
“There can be no certainty that a transaction will ultimately take place and any possible transaction would be conditional on approval by the shareholders and all government and regulatory authorities,” Rio said.
The announcement comes after reports that the miner was looking to negotiate a £6.17bn investment.
The deal could be one of China’s biggest overseas investments outside of the financial sector. It is thought China is attracted to a stake in Rio because it would guarantee the future supply of the iron ore used in making steel.
Rio’s debt levels have caused concerns among investors in recent months and it is hoped the capital injection from Chinalco could address those issues. Rio’s shares rose 6% yesterday.
Chinalco could up its shareholding in Rio to 15%, potentially through a share placing which could raise around £685m.
Last week rival Xstrata announced a £4.1bn rights issue in a bid to shore up its balance sheet. Miners across the board are facing a sharp fall in commodity as metal and oil prices fall in a global economic slowdown.
Last November BHP Billiton abandoned an offer for Rio because of the deteriorating conditions.
Soon after, Rio announced it planned to axe 14,000 jobs as part of its response to weakening global demand.
The company this month confirmed the 650 staff at the Lynemouth plant and its power station, which make the company the largest single private employer in Northumberland, will not be affected by the job cutting plans.
