Chinalco won't buy into BHP, looks toward Rio

Aluminum Corp of China (Chinalco) will not buy into BHP Billiton but could vote in favor of its all-share offer for rival Rio Tinto, President Xiao Yaqing told reporters on Tuesday.

Xiao said Chinalco, the single largest shareholder in Anglo-Australian miner Rio Tinto, had the right to accept or refuse BHP's offer and had not yet decided which course it would take.

He also ruled out the idea of buying into BHP Billiton, a theory which gained traction among market analysts after BHP's CEO Marius Kloppers said in May that he had no doubt Chinese money would eventually feature on the firm's share register. "I have no such plan," Xiao said.

Chinalco, formed five years ago through the consolidation of more than 60 aluminum smelters, bought 12 percent of Rio's London-listed shares, or 9 percent of Rio Group's total equity, in January, jointly with U.S. aluminum firm Alcoa Inc (AA.N: Quote, Profile, Research, Stock Buzz).

The stake purchase was widely seen as a deliberate move to stymie BHP's bid, based on Beijing's fear that a BHP-Rio tie-up would create an iron ore giant with unacceptable control over the supply of the crucial resource to China's steel industry.

Xiao said his plan was to use the stake as a platform to give Chinalco status and a voice and presence on the global stage.

To cut costs, Chalco is also in talks for a number of power projects which should increase its power generation capacity to 50 percent of its needs, from 20 percent now.

Chinalco's aluminum interests are grouped together in Chalco and Xiao plans to pool Chinalco's remaining assets, including copper, in another company, which could be listed.

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