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Chinalco wins 1st nod from Australia for deal
By Fu Chenghao |
March 26, 2009, Thursday
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Print Edition
Print Edition
ALUMINUM Corp of China, also known as Chinalco, won approval yesterday from Australia's competition watchdog to invest in Rio Tinto, clearing the first hurdle facing the US$19.5-billion deal.
The Australian Competition and Consumer Commission said it will not oppose the proposed investment by Chinalco, rejecting opponents' argument that Rio may drive down iron ore prices given Chinalco's role, a move that will benefit Chinese steel industry but hurt Australia.
"The ACCC concluded that Chinalco and Rio Tinto would unlikely have the ability to unilaterally lower global iron ore prices below competitive levels," the regulator said.
The commission also examined competition for the supply of copper, alumina and bauxite but found that there was little direct overlap in the operations of Rio and Chinalco and the deal would therefore not result in substantially less competition in these markets.
Chinalco said it welcomed ACCC's decision, calling this an important step in securing full regulatory clearance.
"Chinalco's US$19.5-billion investment would largely improve Rio's financial condition," Beijing-based Chinalco said in a statement. "(We) will help Rio become the leader in the mining industry over the next 10 years" given Chinalco's sound relationship in the Chinese market.
Chinalco in February agreed to invest US$19.5 billion in debt-ridden Rio. Chinalco would take 15 percent of Rio's Hamersley iron ore unit and jointly sell 30 percent of the mine's output in China.
The deal would help boost Chinese mills' bargaining power in annual ore price talks over the long term, but analysts don't see an immediate impact on prices. Iron ore is used to make steel.
Still, Chinalco has to gain approval from Australia's Foreign Investment Review Board, which last week extended a review on the deal by 90 days. While the ACCC's approval was widely expected, a nod from the board will be more challenging.
The Australian Competition and Consumer Commission said it will not oppose the proposed investment by Chinalco, rejecting opponents' argument that Rio may drive down iron ore prices given Chinalco's role, a move that will benefit Chinese steel industry but hurt Australia.
"The ACCC concluded that Chinalco and Rio Tinto would unlikely have the ability to unilaterally lower global iron ore prices below competitive levels," the regulator said.
The commission also examined competition for the supply of copper, alumina and bauxite but found that there was little direct overlap in the operations of Rio and Chinalco and the deal would therefore not result in substantially less competition in these markets.
Chinalco said it welcomed ACCC's decision, calling this an important step in securing full regulatory clearance.
"Chinalco's US$19.5-billion investment would largely improve Rio's financial condition," Beijing-based Chinalco said in a statement. "(We) will help Rio become the leader in the mining industry over the next 10 years" given Chinalco's sound relationship in the Chinese market.
Chinalco in February agreed to invest US$19.5 billion in debt-ridden Rio. Chinalco would take 15 percent of Rio's Hamersley iron ore unit and jointly sell 30 percent of the mine's output in China.
The deal would help boost Chinese mills' bargaining power in annual ore price talks over the long term, but analysts don't see an immediate impact on prices. Iron ore is used to make steel.
Still, Chinalco has to gain approval from Australia's Foreign Investment Review Board, which last week extended a review on the deal by 90 days. While the ACCC's approval was widely expected, a nod from the board will be more challenging.
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