Chinalco Says Doesn¡¯t Want Control of Rio Tinto Group (Update1)

Aluminum Corp. of China downplayed concern it will control Rio Tinto Group through a planned $19.5 billion investment, as it lobbies Australia not to block the deal on national interest grounds.

State-owned Chinalco, won¡¯t achieve ¡°any control in any sense¡± of Rio, Chairman Xiong Weiping said at a press conference in Sydney today before meeting with officials from Australia¡¯s Foreign Investment Review Board. Australia is his first foreign visit since being appointed last month.

The investment by Chinalco, already London-based Rio¡¯s largest shareholder, is part of $25 billion in spending on mines and companies planned by China last month as commodity prices slumped to seven-year lows. Australian opposition Senator Barnaby Joyce has called for an inquiry into the investments.

¡°We hope we can have a constructive discussion with Foreign Investment Review Board officials,¡± Xiong said today. ¡°We do not have current plans to increase our stake in Rio Tinto at the moment. We do not want to see any changes to this package agreement.¡±

Rio declined 6.4 percent to A$44.23 at the 4:10 p.m. Sydney time close on the Australian stock exchange. The company¡¯s shares have dropped 15 percent since agreeing the deal with Chinalco.

Chinalco agreed Feb. 12 to buy stakes in Rio projects, including iron ore and copper mines in Australia and Chile, for $12.3 billion and purchase $7.2 billion of convertible bonds. Shareholders are ¡°concerned¡± about the investment, the Australian Shareholders Association has said.

The investments face scrutiny by Australia¡¯s Treasurer Wayne Swan, who can reject them on national interest grounds. The agreement may help Australia recover faster from the effects of the global recession, Xiong said.

Raising Stake

Beijing-based Chinalco would raise its stake in Rio to 18 percent if all of the debt it¡¯s buying were converted to stock. It hopes to complete the purchases by the end of July, Xiong said.

The Chinese company is getting a 15 percent stake in Rio¡¯s Hamersley iron ore unit and will jointly sell 30 percent of the output in China under the terms of the agreement. China is the world¡¯s largest iron ore consumer.

Joyce last month called for an inquiry to consider tightening Foreign Investment Review Board rules amid Chinese sovereign investment in Australian resources. Joyce needs support from his Liberal-National coalition¡¯s other 35 senators and from five Greens to begin the inquiry.

Joyce made the call before investments by two other Chinese state-owned companies in Australian producers were announced.

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