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Chinalco in talks to buy debt-laden Rio assets

By Fu Chenghao | February 3, 2009, Tuesday | Print Edition

ALUMINUM Corp of China (Chinalco) is in talks with Rio Tinto to buy assets from the debt-laden Anglo-Australian mining giant.

Chinalco, already the largest shareholder in Rio, may buy minority interests in various businesses and also invest in convertible instruments, Rio said in a statement yesterday.

"There can be no certainty that a transaction will ultimately take place and any possible transaction would be conditional upon approval by the shareholders of Rio Tinto and all necessary government and regulatory authorities," Rio said in response to earlier British press speculation regarding its discussions with Chinalco.

The Sunday Times reported on Sunday that a deal could be worth up to 6.1 billion pounds (US$8.9 billion) while the Sunday Telegraph said Chinalco may raise its holdings in Rio's London-traded unit to 18 percent and buy 14 percent of its Sydney-listed shares under the plan.

A Chinalco spokesman in Beijing confirmed that talks were held and said the firm has always been considering raising its stake. "There would be many options and nothing has been decided," he said.

Analysts said it's no surprise Chinalco has become increasingly keen in Rio, which produces iron ore, aluminum and copper, as commodities are now cheap.

Rio has been struggling to cut US$38 billion in debt, mostly linked with the purchase of Canada's Alcan Inc. The plunge in commodity prices due to the global economic slump has hit Rio.

Rio has pledged to pay off about US$10 billion by the end of the year through asset sales, spending cuts and trimming jobs. So far it has sold about US$4.6 billion of assets since announcing the asset disposal program.

Chinalco, with United States aluminum maker Alcoa Inc, acquired 12 percent in Rio's London-listed unit in February last year for about US$14 billion. That stake amounted to 9 percent of the whole Rio Tinto group.

Chinalco has won approval from the Australian government to raise its stake in the entire Rio group to no more than 14.99 percent. It would have to seek a fresh nod if the latest plan took the holding past this level.

Rio would like to have a deal with Chinalco to announce on February 12 when it publishes its full-year results.

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