Manufacturing News

Rio Tinto 'Committed' To Chinalco Deal

Debt-laden miner said it remains committed to a $19.5 billion deal with China's Chinalco, despite market speculation it might be backing away from the tie-up.

Debt-laden miner Rio Tinto Ltd. said it remains committed to a $19.5 billion deal with China's Chinalco, pouring cold water on market speculation it might be backing away from the tie-up.
The comments came in response to a request from the Australian Securities Exchange to try to explain a plunge in the company's share price this week as rumors swirled that the Chinalco deal might be off.
Rio, the world's third-largest miner, also said that the planned tie-up with the state-owned Aluminum Corp. of China had cleared another hurdle by receiving approval by U.S. foreign investment regulators.
"The company notes the continuing media speculation regarding possible alternatives to its proposed strategic partnership with Aluminum Corp. of China," company secretary Stephen Consedine said in a letter to the exchange.
"The company remains committed to delivering this strategic partnership," he said.
Rio Tinto's share price surged Friday. It closed more than 7 percent higher at 61.88 Australian dollars after plunging almost 12 percent on Thursday. Market indices rose about 1.3 percent.
Chinalco offered in February to invest $12.3 billion in joint investments in aluminum, copper and ore mining with Rio Tinto, and to spend $7.2 billion on convertible bonds in the company. If redeemed for shares, the bonds would almost double Chinalco's existing 9.3 percent stake in Rio Tinto to 18 percent.
The Anglo-Australian miner's board has backed the deal, which would reduce its $40 billion in debt, mostly attributable to its purchase of Canadian aluminum producer Alcan Inc. in 2007.
But the plan has been opposed by some lawmakers in Australia because it involves selling important assets into foreign hands, and by some investors who argue Chinalco is getting too good a deal.
Australian regulators are expected to make a decision on the plan by mid-June.
The London-based company has operations across the world, and the Chinalco deal was approved last month by German regulators. The two companies announced Friday they had received clearance from the U.S. Treasury's Committee on Foreign Investment for the U.S. part of the deal, which involves issuing convertible bonds to Chinalco and a minority stake in Kennecott Utah Corp.
Media reports in Australia said the market speculation on Thursday was that Rio Tinto may scrap the Chinalco plan and instead pursue a share issue to raise money to reduce debt.
Responding to a query from the exchange, Consedine said Friday it would be premature to comment on whether Rio Tinto's operating results for the six months to June 30 this year would vary more than 15 percent from the year-earlier period.
He referred the exchange to Chairman Jan du Plessis' comments last month, which Consedine paraphrased as "the crisis in the global financial system has brought a dramatic slide in economic activity and in the demand and price levels for most of the company's products."
He also said Rio Tinto would reap $900 million from the sale of undeveloped projects in the half-year to June 30.

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