Chinalco keen to dispel fears over Rio

The new president of Chin­alco on Monday stepped up an aggressive lobbying campaign to persuade Australia¡¯s regulators and politicians in Canberra to wave through the state-owned metals company¡¯s proposed $19.5bn investment in Rio Tinto.

Xiong Weiping, officially appointed to the top job last Thursday, denied suggestions that the proposed deal would give Chinalco control over key Australian resources and influence over commodity pricing.

Mr Xiong said the deal would not change Rio¡¯s corporate strategy, the way it operates its business or the pricing of its products.

Chinalco joins two other Chinese investors ¨C MinMetals and Hunan Valin ¡ª that are waiting for Wayne Swan, Australia¡¯s treasurer, to approve investments amid a national debate over the flood of Chinese money targeting strategic resources.

MinMetals has launched a A$2.4bn (US$1.5bn) takeover offer for struggling zinc and copper producer Oz Minerals, and Hunan Valin hopes to acquire a 16.5 per cent stake in Fortescue for A$1.2bn.

Mr Xiong said that any potential conflict of interest would be settled by a special committee made up of Rio¡¯s chief executive, chair and finance director. Where a potential conflict of interest exists the Chinalco directors will not have a vote.

The Chinalco president stressed the company had no current plans to lift its stake in Rio or sell on its stake in any of the assets to other state-owned enterprises.

He said the company¡¯s intention was to ¡°ensure the liquidity of the assets¡± and ¡°maximise the value of the portfolio of assets¡±.

Industry observers have suggested that Chinalco, which does not hold iron ore assets in its portfolio, could spin off these assets to Baosteel.

Mr Xiong said that while the group¡¯s immediate objective was to complete the Rio Tinto deal, it was also looking at potential investments in other Australian miners. ¡°Anything that fits into that category ¨C we¡¯ll be interested,¡± he said.

Although Chinalco¡¯s president made it plain that he did not want to see changes in the deal the company has struck with Rio, people close to the transaction said Mr Swan was unlikely to approve the deal without some concessions.

Under the deal, Chinalco will pay $12.3bn for stakes in Rio Tinto¡¯s key iron ore, copper and aluminium assets and $7.2bn for convertible notes that would double its equity interest in Rio Tinto to 18 per cent.

Should other Rio shareholders demand to buy subordinated convertible bonds on similar terms, Chinalco¡¯s stake in Rio will be diluted.

The investments face tough scrutiny by Mr Swan, who warned that the government would take its time in making a decision. This sent Rio Tinto¡¯s stock nearly 7 per cent lower.

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