Rio may cash out amid China aluminium reshuffle

Rio Tinto may raise much-needed cash by selling out of a Chinese aluminium joint venture, whose co-owner is consolidating assets

to prepare for a takeover by another state-owned company, sources in the two companies said.

Rio's joint venture partner, Qingtongxia Aluminium, is set to be taken over by state-owned China Power Investment Corp to form China's second-biggest producer of aluminium after Chalco , said the sources, who declined to be identified because they are not authorised to speak to the media.

'China Power is assessing our assets,' said an official at Qingtongxia, who did not want to be named due to the sensitive information.

Qingtongxia was in talks with Rio Tinto to buy back all the shares it currently did not own in the joint venture smelter, in order to consolidate its assets before the takeover, according to an official at Qingtongxia and a source

at China Power.

'Qingtongxia will come in with the new joint venture smelter,' the source

at China Power said.

The joint venture smelter has 150,000 tonnes of aluminium smelting capacity a year, about a quarter of Qingtongxia's total capacity.

A Rio Tinto spokesman in London, Nick Cobban, said the company declined to comment for now.

Rio Tinto acquired half of a joint venture with Qingtongxia, a smelter controlled by the government of the Ningxia region, when it bought Canadian aluminium firm Alcan for $38 billion last year, a deal that has left it struggling to shake off $40 billion in debt.

Rio has pledged to raise $15 billion in asset sales but has raised just $3 billion so far.

When BHP Billiton abandoned its hostile bid for Rio last month, punishing

Rio's shares, the firm was faced with the challenge of selling assets while the market for its products collapsed amid the global financial slowdown.

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