Chinalco cleared to raise holding in Rio

Aluminium Corporation of China has won permission to raise its stake in Rio Tinto, potentially enhancing its ability to disrupt BHP Billiton's $127bn (¡ê68.6bn) hostile bid for its rival miner.

Wayne Swan, Australian Federal Treasurer, said he would permit Chinalco, China's biggest aluminium producer, to buy up to 14.99 per cent of Rio Tinto's London-listed shares. That would equate to an 11 per cent stake in the mining company's combined Australian and London equities.

The move by Chinalco is not regarded as a blocking stake to BHP Billiton's bid for Rio Tinto. However, when in February the state-owned Chinalco joined forces with Alcoa, the US metals group, to buy a 9 per cent stake in Rio Tinto, it sparked speculation that Chinalco had been encouraged to do so by Beijing to block BHP Billiton's plans for Rio Tinto, due to concerns about competition and pricing.

Mr Swan said he had no objections to Chinalco increasing its stake under Australia's foreign investment rules on condition that Chinalco does not do so without receiving fresh government approval.

The move comes ahead of Rio's interim results tomorrow when the miner is expected to reiterate its determination to remain independent.

In response to criticism that the government had changed its policy and had adopted a more restrictive stance, he said that the requirement by foreign state-run entities to notify the treasury before making a significant investment was not new.

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