Australian Foundation Concerned by Chinalco, Rio Deal (Update1)

Australian Foundation Investment Co. said it¡¯s ¡°deeply concerned¡± by the proposed $19.5 billion investment by Aluminum Corp. of China, or Chinalco, in Rio Tinto Group, the world¡¯s third-largest mining company.

¡°Significant influence has been given to Chinalco with no premium paid,¡± Melbourne-based Australian Foundation said today in a shareholder presentation sent to the Australian stock exchange. The proposed deal raised potential conflicts of interest over investment decisions, it said.

State-owned Chinalco agreed last month to buy convertible bonds sold by Rio and stakes in the company¡¯s projects that include Australian and Chilean iron-ore and copper mines. Legal & General Plc, the second-largest institutional shareholder in Rio¡¯s U.K. shares, has called for an alternative proposal.

¡°We are deeply concerned about Chinalco becoming involved with the running of the business,¡± the fund said. ¡°We are assessing the proposal from the perspective of being a long-term investor.¡±

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