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March 16, 2010

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Home » Business » Energy

Aussies happy with Chinese report

AUSTRALIA yesterday welcomed a report saying that China did not blame Rio Tinto or the Australian government for the collapse of a US$19.5 billion tie-up between Chinalco and the mining giant.

The Australian Age newspaper reported from Beijing that a detailed report to the State Council, China's Cabinet, blamed economic forces and a powerful public relations campaign by BHP Billiton for the failure of what would have been China's biggest offshore investment.

Australia's trade minister said the report should help heal bilateral ties, soured over the failed bid, and that Australia continued to welcome foreign investment to help expand its iron ore production.

"That's an important concession, if it's true, and we welcome that, and hope that not only was it a learning process, but it provides the basis for moving forward with our relationship with China on a more solid footing," Simon Crean said.

Chinalco had agreed a US$19.5 billion equity and asset tie-up to help rescue Rio Tinto from its debt woes in February 2009, which the Anglo Australian miner abruptly called off in June, opting instead to raise money via a rights offer and form an iron ore venture with BHP.

The collapse of the deal damaged relations between Australia and China. A month later, China arrested four Shanghai-based Rio Tinto staff, including Australian citizen Stern Hu, on allegations of spying and bribery, deepening the rift.

"Objectively speaking, the failure of the merger between Chinalco and Rio Tinto lies in the rapid recovery of the world resources market, including the related stock market, which was beyond everyone's expectations," according to the Age newspaper.

Chinalco Vice President Lu Youqing said yesterday that he had not read the report, but added: "The case is over."

"We have analyzed it already. It is a normal business activity and not every activity has to be a successful one. Also, an unsuccessful one is not necessarily a bad thing.

"What we are thinking now is what to do next to develop the company, not struggle with the past," Lu said.

The report concluded that China underestimated the backlash to the deal and the effectiveness of a campaign led by Rio's rival BHP against the Chinese company owning resources in Australia.


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