Chinese loan to Rio subject to Chinalco deal

Domain-b reported that China's hunger for minerals is scaling new heights in 2009 to get the Chinalco deal passed by a hesitant Australian government and angry shareholders.

As per report, the Exim Bank of China has offered Rio Tinto loans potentially worth USD 20 billion to develop future mining projects in Australia, China and else where in the world. The USD 20 billion would be made available to Rio Tinto as soft loans to develop mining projects in Australia, China and other parts of the world, which it would not be able to do under the current tight credit market.

According to the report, however, the loan is contingent on the state owned China Aluminium Rio Tinto deal being passed by the Australian regulators.

Last month, Beijing made its biggest investment ever in a foreign company, when state-owned Aluminium Corporation of China offered to invest USD 19.5 billion into troubled mining giant Rio Tinto, where the Chinese company's holding in Rio would increase from an existing 9% to 18%. But the deal has run into a storm with the Australian government, shareholders of Rio and arch rival BHP Billiton both seething in anger with BHP pulling out all stops to scuttle the deal in Canberra.

Just minutes before Rio Tinto announced the deal, the Australian government amended the foreign acquisitions and takeovers act of 1975, making convertible debt to be treated as equity with the change coming into effect immediately.

Apart from the government, many investors and shareholders are furious and voiced their opposition to the deal and said they would not let the deal go through since the miner had rejected larger rival BHP Billiton bid of over USD 147 billion while selling some of its best assets to Chinalco at bottom of the market prices in order to pay off its huge debt of USD 39.1 billion incurred in the Alcan acquisition.

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